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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


2 
THE  INHERITANCE  TAX 


STUDIES  IN  HISTORY,  ECONOMICS  AND  PUBLIC  LAW 

EDITED  BY   THE   FACULTY   OF   POLITICAL  SCIENCE 
OF  COLUMBIA   UNIVERSITY 


Volume  IV] 


[Number  2 


THE  INHERITANCE  TAX 


MAX   WEST,  Ph.D. 

Ill 

Sometime  Fellow  and  Lecturer  in  Columbia  University 
Special  Examiner  in  the  Bureau  of  Corporations 


SECOND   EDITION 
COMPLETELY   REVISED   AND   ENLARGED 


610  PACIfre^imjTUAL  BUILD'NG 
LOS  ANGELES,  CALIh  O. . 

^cto  l!)ork 
THE  COLUMBIA  UNIVERSITY  PRESS 

THE  MACMILLAN  COMPANY,  AGENTS 

London  :  P.  S.  King  &  Son 

1908 


T 

1308 


Copyright,  1908 

BY 

MAX  WEST 


.:  /i 


'■/ 


Z'  ss 


PREFACE  TO  THE  SECOND  EDITION. 


In  the  fourteen  years  which  have  passed  since  the  first 
edition  of  this  study  was  published,  the  taxation  of  in- 
heritances has  not  only  made  rapid  headway  in  America, 
but  has  become  a  much  more  important  source  of 
revenue  in  the  principal  countries  of  Europe.  High 
progressive  rates  in  Great  Britain,  France,  Italy,  and  Ger- 
many have  increased  the  public's  share  of  large  fortunes  to 
proportions  formerly  unheard  of  outside  of  Australia  and 
Switzerland,  the  world's  economic  experiment  stations. 
Even  in  the  United  States  several  states  have  adopted 
progressive  scales  which  make  large  fortunes  passing  to 
distant  relatives  pay  very  respectable  percentages,  and 
in  many  cases  even  direct  heirs  are  now  required  to  pay 
something. 

When  it  became  necessary  to  reprint  this  number  of 
the  Studies,  therefore,  I  was  unwilling  that  it  should  be 
done  until  I  could  find  time  to  look  over  the  recent 
statutes,  or  at  least  the  more  important  of  them,  and 
make  the  statements  of  fact  correspond  with  present 
conditions.  This  has  been  no  slight  task,  for  there  is 
no  complete  index  of  foreign  legislation.  I  have  had  ac- 
cess to  the  admirable  collection  of  laws  and  commen- 
taries in  the  Library  of  Congress,  and  have  taken  advan- 
tage of  the  compilations  and  comments  of  Professor 
Schanz  in  Finanz-Archiv ;  but  I  shall  not  again  under- 
take to  report  on  the  world's  legislation  on  any  subject 
175]  5 


6  THE  INHERITANCE  TAX  [176 

until  Congress  heeds  Mr.  Putnam's  repeated  suggestions 
concerning  the  need  of  indexing  and  summarizing  for- 
eign legislation,  or  until  some  public-spirited  millionaire 
adopts  the  idea  ris  a  means  of  prepaying  his  death  duties. 

The  term  inheritance  tax  is  used  in  this  monograph 
to  mean  any  tax  on  the  devolution  of  property,  real  or 
personal,  either  by  will  or  by  intestacy.  Succession  tax 
is  essentially  a  synonymous  term,  and  is  so  used  with 
reference  to  most  countries,  but  in  Great  Britain  and  the 
United  States  it  has  acquired  a  more  restricted  meaning. 
By  a  collateral-inheritafice  tax  is  meant  one  applying 
only  to  collateral  heirs  and  strangers  in  blood,  or  one 
from  which  direct  descendants  at  least  are  exempt. 

I  have  used  a  number  of  other  expressions  in  the 
popular  rather  than  the  strictly  legal  sense.  Thus,  in 
using  the  words  inheritance  and  siiccessioji  as  applying 
to  the  property  received,  and  the  corresponding  words 
heir  and  successor,  I  have  disregarded  the  legal  distinc- 
tions between  testacy  and  intestacy,  and  between  realty 
and  personalty.  At  times  I  have  distinguished  between 
the  rights  of  inheritance  and  bequest;  but  these  terms  also 
are  applied  to  both  real  and  personal  property. 

I  have  incorporated  in  this  edition  the  substance  of 
certain  articles  previously  published,  namely  in  the  Politi- 
cal Science  Quarterly  for  September,  1893,  in  the  Journal 
of  Political  Econo7ny  for  September,  1898,  and  in  the  New 
York  State  Library's  annual  Review  of  Legislation. 

As  the  Library  of  Congress  has  recently  issued  a  care- 
fully-prepared list  of  works  relating  to  taxation  of  inher- 
itances and  of  incomes,  it  has  seemed  unnecessary  to 
reprint  the  bibliography  in  this  edition. 

M.  W. 
Washington,  September,  1907. 


LoYSNTn.^'^'^  '^^^^^^  BUILDING 
LOS  ANGELES,  CALIFORNIA 


CONTENTS. 


CHAPTER  I.    ORIGINS. 

PAGB 

I.  Egypt  and  Rome 1 1 

II.  The  Middle  Ages 15 

III.  Periods  of  Transition 19 

CHAPTER  II.    FRANCE. 

I.  Historical  Development 22 

II.  The  Progressive  Tax  of  To-day 24 

III.  Incidental  and  Supplementary  Taxes 27 

IV.  Revenues  and  Proposed  Increase 30 

CHAPTER  III.     GERMANY. 

I.  State  Inheritance  Taxes 32 

II.  The  Imperial  Law  of  1906 35 

CHAPTER  IV.     SWITZERLAND. 

I.  Historical  Development  and  Rates  in  Force 39 

II.  Cantons  Having  Progressive  Taxes 42 

III.  Other  Cantons 44 

CHAPTER  V.  OTHER  COUNTRIES. 

I.  The  Netherlands 47 

II.  Austria-Hungary 49 

IIL  Italy 50 

IV.  Russia 5a 

V.  Scandinavian  Countries 53 

VI.  Other  European  Countries 54 

VII.  Spanish  America 57 

VIII.  Japan 59 

177]  7 


8  CONTENTS  [178 

PAGE 

■  CHAPTER  VI.    THE  BRITISH  EMPIRE. 

I.  The  United  Kingdom 60 

II.  Australasia 66 

I   .           III.  The  Cape  of  Good  Hope 76 

IV.  India 76 

V.  Canada 77 

VI.  A   Conflict  of  Jurisdiction 85 

CHAPTER  VII.     THE  UNITED  STATES. 

I.  Federal  Inheritance  Taxes 87 

II.  Pennsylvania , 97 

III.  Louisiana loi 

IV.  Virginia 104 

V.  Maryland 108 

VI.  North  Carolina no 

VII.  Alabama 113 

VIII.  Delaware 114 

IX.  Wisconsin IIS 

X.  Minnesota Ii8 

XL  New  Hampshire 123 

XII.  Illinois 124 

XIII.  New  York 126 

XIV.  West  Virginia 129 

XV.  Connecticut I3f0 

XVI.  Massachusetts 131 

XVII.  Tennessee 133 

XVIII.  New  Jersey 134 

XIX.  Ohio 135 

XX.  Maine 137 

XXI.  California 137 

XXII.  Michigan 139 

XXIII.  Missouri 140 

XXIV.  Iowa 142 

XXV.  Vermont 142 

XXVI.  Montana 143 

XXVII.  Colorado 143 

XXVIII.  Nebraska 144 

XXXIX.  Washington 14S 

XXX.  Utah 145 

XXXI.  Arkansas 146 

XXXII.  Oregon 146 

XXXIII.  Wyoming 147 


179]  CONTENTS  g 

PACK 

XXXIV.  North  Dakota 148 

XXXV.  South  Dakota 149 

XXXVI.  Kentucky 149 

XXXVII.  Idaho 150 

XXXVIII.  Texas 150 

XXXIX.  Hawaii 151 

XL.  Porto  Rico 151 

XLI.  Summary 1 52 

XLII.  Administration 154 

CHAPTER  VIII.     LEGAL  THEORIES. 

I.  Constitutionality,  Nature,  and  Subject  of  the  Tax 156 

II.  Legality  of  Progressive  Rates 169 

III.  The  Law  of  Exemption 176 

IV.  Domicile  and  Situs 180 

CHAPTER  IX.     ECONOMIC  THEORY. 

I.  Historical  Survey 189 

II.  The  Arguments  Classified 199 

As  a  Limitation  of  Inheritance 199 

As  a  Fee 201 

As  a  Tax 204 

III.  Objections  Considered 209 

IV.  Practical  Advantages 213 

V.  Specific  Problems 216 

VI.  Graduation  according  to  Relationship 217 

VII.  Exemptions 219 

VIII.  Progressive  Rates 221 

IX.  Calculation  of  Revenue 228 

X.  Conclusion   .• 231 

Appendix — Proceeds  of  Inheritance  Taxes  in  the  United  States.  .  .  .   235 

Table  of  Cases   239 

Index    243 


"  If  I  mistake  not,  a  conspicuous  characteristic  of  our  century  has 
been  the  rapid  multiplication  of  the  idle  rich.  In  the  conditions  of 
modern  life  it  is  quite  possible  for  a  man  to  have  a  colossal  fortune  in 
forms  that  require  absolutely  no  labour,  and  bring  with  them  no  neces- 
sary or  obvious  duties.  .  .  .  Wealth  which  brings  with  it  no  ties  and 
is  obtained  and  enjoyed  with  no  effort  is  to  most  men  a  temptation 
and  a  snare.  All  the  more  dissipated  capitals  and  watering-places  of 
Europe  and  America  are  full  of  examples  of  men  in  this  position, 
living  lives  of  absolute  frivolity,  dissociated  from  all  serious  interests, 
ever  seeking  with  feverish  eagerness  for  new  forms  of  pleasure,  raising 
the  standard  of  luxury  and  ostentation,  and  often,  in  still  graver  ways, 
depressing  the  moral  tone  of  the  society  in  which  they  live." — W.  E.  H. 
Lecky,  Democracy  and  Liberty. 

"  Experience  has  taught  me  that  great  fortunes  acquired  by  inheri- 
tance never  bring  happiness,  they  only  dull  the  faculties.  Any  man 
possessing  a  large  fortune  ought  not  to  leave  more  than  a  small  part 
of  it  to  his  heirs,  not  even  to  his  direct  heirs — just  enough  to  make 
their  way  in  the  world." — Alfred  Nobel. 

"  There  is  every  reason  why,  when  next  our  system  of  taxation  is 
revised,  the  National  Government  should  impose  a  graduated  inherit- 
ance tax,  and,  if  possible,  a  graduated  income  tax.  The  man  of  great 
wealth  owes  a  peculiar  obligation  to  the  State,  because  he  derives 
special  advantages  from  the  mere  existence  of  government.  Not  only 
should  he  recognize  this  obligation  in  the  way  he  leads  his  daily  life 
and  in  the  way  he  earns  and  spends  his  money,  but  it  should  also  be 
recognized  by  the  way  in  which  he  pays  for  the  protection  the  State 
gives  him." — President  Roosevelt,  Message  of  December  4,  1906. 


CHAPTER  I 

ORIGINS 
I.  Egypt  and  Rome 

The  origin  of  the  inheritance  tax  has  usually  been  attrib- 
uted to  the  Emperor  Augustus,  who  is  known  to  have  es- 
tablished such  a  tax  at  Rome  in  the  year  6  A.  D.  Some 
writers  have  expressed  the  belief  that  a  similar  tax  was 
imposed  nearly  two  centuries  earlier,  by  the  Voconian  law 
limiting  the  power  of  bequest;  but  of  this  there  is  no  con- 
clusive evidence.  If  such  a  tax  was  introduced  at  that  time 
it  was  of  short  duration.  Octavian  and  Antony,  at  the 
time  of  the  war  against  Pompey,  attempted  to  impose  a  tax 
on  testamentary  dispositions  of  property,  but  the  proposal 
was  indignantly  rejected  by  the  Roman  people. 

It  seems  probable  that  the  Romans  borrowed  the  idea  of 
the  inheritance  tax  from  the  Egyptians,  with  whose  finan- 
cial and  administrative  methods  they  were  well  acquainted 
by  the  close  of  the  Republic.  There  is  evidence  that  Egypt 
had  some  sort  of  an  inheritance  tax  at  this  time,  of  which 
the  rate  was  probably  not  less  than  a  tenth,  and  from  which 
not  even  direct  heirs  were  exempt.  A  papyrus  has  been 
found  which  relates  that  a  certain  Hermias  was  sentenced 
to  pay  a  heavy  penalty  for  failing  to  pay  the  tax  on  suc- 
ceeding to  his  father's  house.  Another  inscription  records 
a  sale  of  property  by  an  old  man  to  his  sons  at  a  nominal 
price,  apparently  for  the  purpose  of  evading  the  inheritance 
i8i]  II 


12  THE  INHERITANCE  TAX  [182 

tax.^  The  organization  of  Egyptian  society  was  such  that 
this  exaction  must  have  been  more  nearly  akin  to  a  feudal 
incident  than  to  a  modern  tax ;  yet  it  seems  to  have  formed 
part  of  a  system  of  impositions  on  transfers  of  property  in 
general,  which  has  been  traced  back  to  the  reign  of  Psamet- 
ichus  I  (654-616  B.  C.)  Not  until  117  B.  C.  do  we  find 
the  charge  on  successions  specifically  mentioned,  but  it  is 
perhaps  worthy  of  note  that  in  the  Egyptian  wills  of  the 
third  century  B.  C.  which  have  been  preserved  the  king  and 
queen  were  always  appointed  executors. 

Concerning  the  Roman  tax  our  knowledge  is  much  less 
fragmentary.^  Having  fixed  a  definite  term  for  military 
service,  Augustus  determined  to  create  an  ccrarium  militare 
— a  special  fund  the  object  of  which  was  probably  not  the 
support  of  the  standing  army,  as  has  been  supposed,  but  the 
pensioning  of  veterans.^  The  Emperor  contributed  large 
sums  to  this  fund  from  his  own  fortune,  and  then  requested 
the  Senators  to  submit  plans  for  raising  the  remainder  of 
the  revenue  required.  He  doubtless  wished  them  to  real- 
ize the  difficulty  of  the  problem  of  taxation  before  making 
known  his  own  project;  at  any  rate,  he  rejected  their  pro- 
posals and  introduced  a  tax  of  one-twentieth  upon  inheri- 
tances and  bequests.  Augustus  claimed  to  have  found  this 
tax  proposed  in  the  papers  of  Csesar ;  but  notwithstanding 

1  Lumbroso,  Recherchcs  sur  I'economie  politique  de  l'£gypte,  pp.  307 
et  seq. 

2  Dio  Cassius,  'PufioiKi/  'laropia,  lib.  Iv,  chap.  25;  lib.  Ivi.  chap.  28; 
lib.  Ixxvii,  chap.  9;  Plinius,  Panegyricus,  xxxvii-xl ;  Perez,  Praelec- 
tiones  in  Duodecim  Libros  Codicis  Justiniani,  lib.  vi,  tit.  3S',  Cagnat, 
Les  impots  indirects  chcz  Ics  Romains.  III^  partie;  Clamageran,  His- 
toire  de  I'impdt  en  France,  i,  78;  Pauly.  Real-encyclopiidic  der  clas- 
sischen  Altcrthumswissenschaft,  vi,  2579;  Gibbon,  Decline  and  Fall  of 
the  Roman  Empire,  chap,  vi ;  etc. 

3  Cagnat,  op.  cit.,  p.  181. 


183]  ORIGINS  13 

this  high  authority  he  was  for  some  time  unable  to  obtain 
the  approval  of  the  Senate.  Again  he  called  upon  the  Sena- 
tors to  devise  a  better  tax,  and  when  they  were  unable  to  do 
so  he  threatened  a  general  land  tax,  and  even  sent  out 
agents  to  take  a  census  of  landed  property.  This  stratagem 
proved  effective;  the  Roman  people,  long  exempt  from  di- 
rect taxation,  had  no  desire  to  see  the  land  tax  reimposed, 
and  the  Senate  at  length  approved  the  Emperor's  original 
measure. 

The  vicesiuia  hcrcditatiuin  '  applied  only  to  Roman  citi- 
zens. Small  amounts  were  exempt,  and  allowance  was 
made  for  funeral  expenses,  but  bequests  for  public  statues 
and  temples  were  subject  to  the  tax.  Among  the  old  citi- 
zens of  Rome,  Augustus  exempted  the  nearest  relatives;  no 
such  immunity  was  granted  those  newly  admitted  to  citizen- 
ship, unless  they  had  also  obtained  rights  of  cognation. 
This  discrimination  was  maintained  for  nearly  a  century. 
Nerva  (96-98  A.  D.)  recognized  that  the  closest  of  natural 
ties  were  superior  to  the  artificial  distinctions  of  the  Roman 
law;  he  exempted  successions  between  mother  and  child, 
even  when  no  rights  of  cognation  had  been  granted,  and  the 
patrimony  of  sons  over  whom  the  father  had  acquired 
patria  potestas.  Trajan  (98-117  A.  D.)  completed  the  re- 
forms of  his  predecessor  by  extending  the  exemption  to  all 
sons,  whether  or  not  they  had  been  in  the  patria  potestas, 
and  to  fathers,  grandparents  and  grandchildren,  and  broth- 
ers and  sisters.  These  exemptions  were  probably  no  more 
than  the  old  citizens  had  already  enjoyed;  they  were  in- 
tended to  put  all  citizens  on  an  equal  footing.  To  hasten 
this  result,  Trajan  cancelled  all  debts  to  the  treasury  which 

1  More  often  spelled  hcrcditatum;  but  the  form  of  the  genitive 
given  in  the  text  is  that  found  in  the  inscriptions  wherever  the  word 
is  not  abbreviated. — ^Cagnat,  p.  175,  note. 


14  THE  INHERITANCE  TAX  [184 

were  due  to  the  discriminations  of  the  old  law.  These  gen- 
erous acts  of  the  Emperor  were  immortalized  in  a  sym- 
bolical bas-relief,  which  was  discovered  at  Rome  some  eigh- 
teen centuries  later. 

At  the  time  of  Hadrian  (i  17-138  A.  D.)  it  was  found 
necessary  to  limit  the  deduction  to  be  made  for  funeral  ex- 
penses, and  it  was  decided  that  the  exemption  should  not 
apply  to  extravagant  sums  spent  for  monuments.  Marcus 
Aurelius  (161-180  A.  D.)  also  introduced  some  change  in 
the  law,  but  the  nature  of  his  amendment  is  not  known. 

Very  radical  changes  were  wrought  by  Caracalla.  The 
vicesinia  was  a  fruitful  source  of  revenue,  but  Caracalla 
doubled  the  rate  and  abolished  the  exemptions  in  favor  of 
near  relatives.  To  increase  the  revenue  still  further,  in 
212  A.  D.  he  extended  Roman  citizenship,  and  with  it 
liability  to  the  inheritance  tax,  to  all  the  free  inhabitants  of 
the  whole  Empire.  This  extension  of  citizenship  was  per- 
manent, but  the  old  rate  and  exemptions  were  restored  by 
Macrinus  (217-218  A.  D.). 

It  is  impossible  to  say  just  when  the  Roman  inheritance 
tax  was  repealed.  It  existed  as  late  as  the  reign  of  Gordian 
III  (238-244  A.  D.),  but  it  had  disappeared  before  the 
time  of  the  Justinian  Code.^  It  may  have  been  abolished 
by  Diocletian;  perhaps  by  Constantine  the  Great;  perhaps 
by  Justinian  himself. 

The  vicesima  hereditatium,  like  other  Roman  taxes,  was 
at  first  farmed  out  to  the  publicans,  but  from  the  time  of 
Hadrian  it  was  collected  directly  by  the  prociiratorcs  XX 
hereditatium  under  the  supervision  of  a  central  bureau  at 
Rome.  Care  was  taken  to  collect  the  tax  without  loss  of 
time;  only  a  few  days  were  allowed  to  elapse  between  a 
death  and  the  opening  of  the  will.     Even  when  the  will 

1  Codex  Justin.,  vi,  ZZ,  3. 


l85]  ORIGINS  13 

was  contested,  Hadrian  decreed  that  the  heir  named  in  the 
will  should  be  put  in  temporary  possession  and  pay  the  tax, 
after  which  the  contest  might  proceed.  The  Romans  used 
a  simple  mortality  table  or  formula  in  determining  the  value 
of  life  estates. 

II.  The  Middle  Ages 

In  the  middle  ages  the  inheritance  tax  is  represented  by 
the  relief  and  heriot  of  feudal  tenure,  together  with  some 
other  feudal  charges  of  a  similar  nature.  The  relief  was 
a  payment  made  to  the  lord  by  the  heir  of  a  deceased  tenant 
on  being  admitted  to  the  succession.  The  original  theory 
seems  to  have  been  that  at  the  tenant's  death  the  fief  in 
some  sense  escheated  to  the  lord,  who  exacted  a  contribu- 
tion in  return  for  permitting  the  heir  to  take  possession; 
and  this  was  called  (in  Latin)  relcvium,  because  it  raised 
up  and  re-established  the  inheritance,  which  had  fallen  in, 
and  was  uncertain  at  best.^  To  be  sure,  this  may  have 
been  merely  a  pretext  for  extortion,  without  regard  for  the 
terms  on  which  the  fiefs  were  originally  granted.  Hallam 
looks  for  the  real  origin  of  reliefs 

in  that  rapacity  with  which  the  powerful  are  ever  ready  to 
oppress  the  feeble.  When  a  feudal  tenant  died,  the  lord,  tak- 
ing advantage  of  his  own  strength  and  the  confusion  of  the 
family,  would  seize  the  estate  into  his  hands,  either  by  right  of 
force  or  under  some  litigious  pretext.  Against  this  violence 
the  heir  could,  in  general,  have  no  resource  but  a  compromise ; 
and  we  know  how  readily  acts  of  successful  injustice  change 
their  name,  and  move  demurely,  like  the  wolf  in  the  fable, 
under  the  clothing  of  law.^ 

1  "  Incertam  et  caducam  hereditatem  relevabat."  —  Blackstone.  Com- 
mentaries, ii,  56. 

^Middle  Ages,  bk.  ii.  pt.  i. 


1 6  THE  INHERITANCE  TAX  [i86 

At  all  events,  reliefs  continued  to  be  paid  after  the  heredi- 
tary character  of  feudal  tenures  had  become  well  established. 
The  payment  was  either  in  money  or  in  equipments,  and 
was  at  first  arbitrary  in  amount,  so  that  by  demanding  an 
exorbitant  relief  the  lord  could  practically  disinherit  the 
heir;  but  in  England  it  came  to  be  fixed  at  one  hundred 
shillings  for  a  knight's  fee,  or  one-fourth  of  the  supposed 
value  of  the  land.  William  the  Conqueror  (1066-1087) 
is  credited  with  having  first  fixed  the  amount  of  the  re- 
lief, but  his  rules  were  not  followed  by  all  of  his  successors, 
and  excessive  reliefs  were  again  among  the  chief  griev- 
ances alleged  in  12 15.  One  of  the  first  clauses  of  Magna 
Carta  regulated  the  amount  of  the  charge,  as  follows : 

If  any  of  our  earls,  or  barons,  or  others,  who  hold  of  us  in 
chief  by  military  service,  shall  die,  and  at  the  time  of  his  death 
his  heir  shall  be  of  full  age,  and  owe  a  relief,  he  shall  have  his 
inheritance  by  the  ancient  relief ;  that  is  to  say,  the  heir  or 
heirs  of  an  earl,  for  a  whole  earldom,  by  a  hundred  pounds ; 
the  heir  or  heirs  of  a  baron,  for  a  whole  barony,  by  a  hundred 
pounds ;  the  heir  or  heirs  of  a  knight,  for  a  whole  knight's  fee, 
by  a  hundred  shillings  at  most;  and  whoever  oweth  less  shall 
give  less,  according  to  the  ancient  custom  of  fees. 

But  if  the  heir  of  any  such  shall  be  under  age,  and  shall  be 
in  ward  when  he  comes  of  age,  he  shall  have  his  inheritance 
without  relief  and  without  fine. 

A  socage  relief  was  one  year's  rent.  In  knight  service 
the  relief  was  payable  only  if  the  heir  was  of  full  age,  as 
otherwise  the  lord  was  entitled  to  wardship;  but  in  socage 
this  rule  did  not  apply. ^  In  France,  the  relief  or  rachat  was 
usually  one  year's  net  produce;  in  many  provinces  succes- 
sions in  the  direct  line  were  exempt,  the  relief  being  con- 

^  Blackstone,  Commentaries,  ii,  65,  87. 


187]  ORIGINS  17 

sidered  the  means  by  which  collateral  relatives  bought  them- 
selves into  a  succession  to  which  they  were  not  originally 
entitled.  In  the  case  of  lands  held  by  base  tenure  (la  tcrre 
roturierc)  the  corresponding  exactions  were  generally 
known  as  lods  et  vcntes}  Primer  seisin,  in  England,  was 
another  burden  somewhat  similar  to  relief,  but  was  due  only 
to  the  king  from  his  immediate  vassals.^ 

Heriots  (from  hcregeatu,  military  trappings),  originally 
voluntary  donations  or  legacies  from  the  tenants  to  their 
lord,  by  long  usage  became  unavoidable.  Compulsory 
heriots  were  established  in  England  by  the  Danes,  and  King 
Knut  (1016-1035)  enacted  that  in  cases  of  intestacy  the 
lord  should  take  no  more  than  his  rightful  heriot ;  the  heriot 
of  an  earl,  for  example,  being  eight  horses  and  a  corres- 
ponding quantity  of  equipments  and  gold.  In  general, 
the  heriot  came  to  consist  of  the  best  beast  or  other  chattel 
of  which  the  tenant  died  possessed;  though  in  some  cases 
there  was  a  customary  composition  in  money,  as  ten  or 
twenty  shillings,  which  was  binding  on  both  parties.  The 
farleii,  in  Scotch  law,  was  a  payment  of  money  or  goods 
in  lieu  of  heriot. 

At  times  the  heriot  seems  to  have  been  confused  with 
and  even  absorbed  in  the  relief,  although  in  theory  the  two 
exactions  were  quite  distinct.  In  the  heriot  of  the  later 
middle  ages  Pollock  and  Maitland  find  no  less  than  four 
ideas:  (i)  the  warrior  to  whom  arms  and  equipment  were 
loaned  by  the  lord  should  return  them  at  his  death;  (2)  the 
peasant  who  received  his  stock  from  his  lord  should  like- 
wise return  it,  or  if  his  heirs  were  allowed  to  keep  it,  they 

1  Vuitry,  Le  regime  financier  de  la  France,  i,  277,  279;  Clamageran, 
Histoire  de  I'impot  en  France,  p.  208;  Mayer,  Deutsche  und  franzosische 
Verfassiingsgcschichte  vom  9.  bis  sum  14.  Jahrhundert,  ii,  168. 

2  Blackstone,  Commentaries,  ii,  66. 


THE  INHERITANCE  TAX 


[i88 


must  recog-nize  the  lord's  right  by  giving  up  the  best  beast; 
(3)  all  the  chattels  of  a  serf  belonging  in  strictness  of  law 
to  his  lord,  the  best  of  them  was  taken  to  manifest  the 
lord's  right;  or  as  Blackstone  remarks,  the  heriot  was  per- 
haps in  acknowledgment  of  the  tenant's  having  been  raised 
a  degree  above  the  villeinage  in  which  his  chattels  were 
quite  at  the  mercy  of  the  lord;  (4)  in  the  infancy  of  testa- 
mentary power  it  was  prudent,  if  not  necessary,  that  the 
testator  should  purchase  that  favor  of  his  suzerain  without 
which  hig  bequests  would  hardly  stand.  These  exactions 
survived  in  England,  in  some  tenures,  down  to  quite  mod- 
ern times.  After  the  middle  of  the  eighteenth  century, 
Blackstone  wrote  of  Danish  heriots,  transmuted  into  re- 
liefs, frequently  remaining  in  socage  tenure  in  the  form  of 
a  double  rent  payable  at  the  death  of  a  tenant ;  and  likewise 
of  existing  copyhold  heriots  of  Saxon  origin. 

Mortuaries  were  a  sort  of  ecclesiastical  heriot  expected  or 
demanded  in  many  parts  of  England  and  the  continent. 
As  the  lord  was  "  recognized  "  with  the  best  chattel,  the 
church  was  considered  entitled  to  the  second  best,  or  in 
some  cases  the  third  best ;  and  according  to  ancient  usage 
this  was  carried  to  church  when  the  corpse  was  taken  to  be 
buried,  from  which  it  was  sometimes  known  as  a  corse- 
present.  It  is  said  on  good  authority  that  mortuaries  were 
intended  to  make  amends  for  the  tithes  and  other  eccles- 
iastical duties  which  laymen  may  have  neglected  to  pay 
during  life,  and  in  France  those  who  died  without  bequeath- 
ing anything  to  the  church  were  said  to  die  zvitJioiit  con- 
fession, and  in  ancient  times  were  deprived  of  Christian 
burial.  Henry  VIII  fixed  the  amount  of  the  mortuary  to 
be  paid  by  each  householder  strictly  according  to  the  value 
of  his  goods,  exempting  those  leaving  less  than  ten  marks' 
worth,  and  prescribing  payments  of  3s.  4d.,  6s.  8d.,  or  los., 
according  as  the  value  of  the  property  was  between  ten 


189]  ORIGINS  19 

marks  and  thirty  pounds,  between  thirty  and  forty  pounds, 
or  above  the  latter  figure;  except,  indeed,  where  less  or 
nothing  at  all  was  due  by  custom. 

Unlike  the  relief,  the  heriot  was  a  charge  upon  the  chat- 
tels only,  and  not  upon  the  land/  Another  distinction  some- 
times made  is  that  the  heriot  was  considered  as  being  paid 
by  the  dead  tenant,  the  relief  by  his  successor.^  This  dif- 
ference between  them  has  been  compared  to  that  between 
the  modern  English  probate  duty,  paid  before  the  settlement 
of  the  estate,  and  the  legacy  and  succession  duties,  paid 
by  the  heirs  after  the  estate  has  been  distributed.^ 

III.  Periods  of  Transition 

Just  what  relation  these  feudal  incidents  bear  to  the 
viccsima  hercditatium  is  not  easy  to  determine.  It  has  been 
supposed  by  some  that  the  relief  was  derived  from  the  Roman 
tax,*  but  the  supposition  appears  to  be  unwarranted.  The 
vicesima  was  abolished  perhaps  as  early  as  the  third  cen- 
tury, and  certainly  before  the  middle  of  the  sixth;  there  is 
no  evidence  that  anything  corresponding  to  it  existed 
through  the  Dark  Ages,^  and  the  relief  was  a  very  different 
kind  of  exaction,  both  in  theory  and  in  practice.  Its  con- 
nection with  the  viccsima  cannot  have  been  very  direct,  and 
it  seems  more  probable  that  it  was  feudal  in  its  origin  as  in 
its  nature. 

Between  the  feudal  dues  and  the  modern  inheritance 
taxes,  on  the  other  hand,  a  direct  connection  can  be  traced 
in  some  countries.     It  is  true  that  in  England  there  is  no 

1  Blackstone,  Commentaries,  ii,  97,  422 ;  Pollock  and  Maitland,  His- 
tory of  English  Law,  bk.  ii,  chap,  i,  §  7. 

2  Kemble,  The  Saxons  in  England,  i :  179. 

3  Dowell,  History  of  Taxation  and  Taxes  in  England,  3 :  138. 
*  Vuitry,  Le  regime  financier  de  la  France,  i :  281. 

5  Clamageran,  Histoire  de  I'impot  en  France,  i :  168. 


20  THE  INHERITANCE  TAX  [iqq 

direct  historical  connection  between  them,  but  it  seems 
quite  certain  that  in  some  parts  of  the  Continent,  at  least 
in  France,  the  inheritance  tax  grew  out  of  the  relief.  "  But 
fiscal  institutions,  like  others,  obey  the  universal  law  of  evo- 
lution. From  the  feudal  incident  in  which  it  originated, 
the  succession  tax  was  transformed,  in  time,  first  into  a 
royal  due,  then  into  a  public  contribution  collected  for  the 
benefit  of  the  treasury  of  the  State."  ^ 

In  other  places,  the  modern  taxes  on  inheritance  seem 
to  have  been  modeled  rather  upon  the  Roman  tax  than  upon 
feudal  exactions.  During  the  latter  part  of  the  sixteenth 
and  the  early  years  of  the  seventeenth  century  various 
European  scholars  called  attention  to  the  vicesima  heredi- 
tatium  and  recommended  its  imitation ;  ^  and  inheritance 
taxes  were  actually  imposed  during  this  period  in  several 
provinces  of  Germany  and  the  Netherlands.^ 

In  the  cities  of  Italy,  where  also  a  knowledge  of  Roman 
law  may  be  presumed  to  have  survived  or  been  revived,  in- 
heritance taxes  began  to  make  their  appearance  before  the 
close  of  the  fourteenth  century:  at  Genoa  (2  per  cent)  in 
1395,  and  at  Florence,  apparently  at  about  the  same  time. 
At  Venice  a  5  per  cent  collateral-inheritance  tax  was  im- 
posed in  1565;  a  few  years  later  bequests  for  benevolent 

1  Besson,  "  La  progression  des  valeurs  successorales  au  XIXe  siecle," 
Journal  de  la  Societe  de  Statistiqtie  de  Paris,  40:  144  (May,  1899). 

2  Among  these  were  Johann  Sturm,  rector  of  the  gymnasium  at  Stras- 
burg;  Justus  Lipsius,  the  Flemish  philologist;  Georg  Obrecht,  the  jur- 
ist ;  and  Christoph  Besold,  who  has  been  called  Germany's  greatest 
publicist  during  the  first  half  of  the  seventeenth  century,  and  who  is 
thought  to  have  influenced  certain  future  rulers. 

For  a  full  account  of  this  period,  see  Schanz,  "  Studien  zur  Ge- 
schichte  und  Theorie  der  Erbschaftssteuer,"  Finanz-Archiv,  17:  37-62. 
Obrecht's  writings  are  reviewed  also  in  Roscher's  Geschichte  der  Na- 
tional-Oekononiie  in  Deutschland,  pp.  151-158. 

3  See  pp.  32  and  47,  infra. 


19 1  ]  ORIGINS 


21 


purposes  and  those  very  small  in  amount  were  exempted. 
The  Duchy  of  Mantua,  under  the  Gonzagas,  also  had  a 
collateral-inheritance  tax. 

Before  passing  on  to  modern  times,  mention  may  be 
made  of  a  curious  medieval  exaction  of  a  non-feudal  char- 
acter, though  similar  in  theory  to  the  relief,  which  existed  in 
Germany,  Denmark,  and  France.  It  was  known  in  Ger- 
many as  Erbkanf,  or  inheritance-purchase,  and  in  most 
places  was  enforced  only  when  there  were  foreign  or  absent 
collateral  heirs.  The  property  of  childless  citizens  fell  at 
their  death  to  the  magistrate  of  the  town,  who  delivered 
it  to  the  distant  heirs  only  in  case  the  decedent  had  pur- 
chased the  right  of  inheritance  for  them  by  payment  of 
the  prescribed  fee. 


CHAPTER  II 

FRANCE 

I.  Historical  Development 

The  feudal  exactions  on  transfers  of  property,  including 
transfers  from  the  dead  to  the  living,  seem  to  have  become 
established  as  national  taxes  in  France  in  the  sixteenth  cen- 
tury. In  1553  the  formality  of  insinuation  or  registration,^ 
first  introduced  in  a  limited  way  in  1539,  was  extended  by 
Henry  II  to  include  testamentary  dispositions,  sales,  and 
certain  other  transactions,  which  were  thus  made  subject  to 
the  tax  demanded  for  the  registry.  In  1703  Louis  XIV 
made  all  transfers  of  immovables,  either  among  the  living 
or  at  death,  except  those  in  the  direct  line,  subject  to  in- 
sinuation and  the  accompanying  one  per  cent  tax  known 
as  the  centieme-denier.  Until  the  Revolution,  testamentary 
dispositions  were  subject  both  to  insinuation  and  to  the 
droit  de  controle. 

The  French  inheritance  taxes  of  modern  times  form  part 
of  the  system  of  droits  d'enregistrement,^  or  registration 
taxes.  The  original  rates,  prescribed  in  the  law  of  22  fri- 
maire  an  VII,  were  less  for  movable  than  for  immovable 
property;  but  this  distinction  was  afterward  abolished,  and 
the  rates  were  complicated  by  the  addition  of  decimes  ana- 
logous to  the  sous  pour  livre  formerly  added  to  the  droit  de 
controle  and  the  centieme-denier.  The  first  decime  was 
added  to  the  registration  taxes  a  few  months  after  the 
passage  of  the  original  act,  as  a  war  measure;  but  it  was 

1  Dictionnaire  des  -finances,  2  :  392.  ^  Ibid.,  2  :  88. 

22  [192 


193]  FRANCE  23 

continued  in  force  for  more  than  a  hundred  years,  and 
further  additions  were  made  from  time  to  time.^  During 
the  latter  part  of  the  nineteenth  century  the  rates,  including 
two  and  a  half  of  these  decimcs  addiiionels,  were  from  one 
and  one-fourth  per  cent  for  direct  heirs  to  eleven  and  one- 
fourth  per  cent  for  strangers  in  blood.  Besides  this  pro- 
portional tax,  there  was  a  uniform  registration  tax  on  wills 
(historically  the  successor  of  the  insinuation  and  controle 
to  which  testaments  were  subject  under  the  old  regime), 
as  well  as  other  registration  and  stamp  taxes  bearing  some 
proportion  to  the  judicial  proceedings  employed,  but  not 
necessarily  to  the  amount  involved,  and  so  falling  most 
heavily  on  small  estates.  Altogether,  the  government  often 
took  as  much  as  fifteen  or  twenty  per  cent  of  the  value  of  a 
succession."  The  three  taxes  together  constituted  practically 
a  system  of  regressive  taxation,  from  which  no  relief  was 
granted  by  exempting  small  amounts,  as  in  most  other  coun- 
tries. Moreover,  France  was  also  an  exception  to  the  al- 
most universal  rule  in  that  no  deduction  was  allowed  for 
debts.  This  gave  rise  to  much  hardship  and  great  dissatis- 
faction. Said  Leroy-Beaulieu,  "  //  est  impossible  de  voir 
un  plus  inonstrueux  abus  de  la  force  piiblique."  Forced 
sales  of  property  were  often  necessary  in  order  to  pay  the 
taxes  due  on  the  death  of  the  owner.  Still  another  source 
of  complaint  was  the  mode  of  levying  the  tax  on  usufruc- 
tuary and  reversionary  owner.  The  former  paid  the  tax 
on  one-half  the  value  of  the  property,  without  regard  to  his 
probability  of  life;  and  the  latter  paid  at  once  on  the  whole 
value  of  the  property,  just  as  if  he  had  acquired  immediate 
possession. 

Repeated   attempts   were  made   to   remedy   these   evils. 

"^  Annales  de  I'Assemblee  Nationale,  1871,  tome  iv,  annexe  407. 
2  Leroy-Beaulieu,  Science  dcs  finances,  5th  ed.,  i:  5I5-5I7- 


24  THE  INHERITANCE  TAX  [194 

Commissions  were  appointed  to  consider  the  deduction  of 
debts,  and  the  matter  frequently  came  before  the  legisla- 
ture; but  for  many  years  the  reform  was  prevented  by  the 
fear  of  loss  of  revenue,  estimated  at  forty  million  francs  a 
year.  The  existing-  rule  was  sometimes  defended  also  on 
the  ground  that  movables  sometimes  escaped  the  tax  by  con- 
cealment or  undervaluation.  Unsuccessful  attempts  were 
also  made  to  divide  the  tax  between  usufructuary  and  owner 
according  to  the  age  of  the  former ;  and  incidentally,  it  was 
proposed  to  limit  intestate  inheritance  to  six  or  eight  de- 
grees of  relationship,  instead  of  extending  it  to  twelve  de- 
grees. From  a  fiscal  point  of  view,  this  change  would  not 
only  have  increased  the  number  of  escheats,  but  would  have 
raised  the  tax  rate  for  many  distant  relatives  from  ten 
to  eleven  and  one-fourth  per  cent,  the  rate  which  applied 
where  there  was  no  right  of  intestate  inheritance. 

II.  The  Progressive  Tax  of  To-day 
After  prolonged  discussion,  a  progressive  inheritance  tax 
was  voted  in  1895  by  the  Chamber  of  Deputies,  and  in  1898 
by  the  Senate;  but  it  took  three  years  more  to  harmonize 
the  differences  between  the  two  chambers.  Thus  it  re- 
mained for  the  budget  law  of  1901  ^  to  establish  progres- 
sive rates,  as  well  as  to  correct  the  chief  abuse  of  the  earlier 
legislation  by  providing  for  the  deduction  of  clearly  proven 
debts.  By  this  law  the  rates  on  inheritances  and  legacies 
below  two  thousand  francs  in  value  were  fixed  at  one  per 
cent  for  direct  heirs,  three  and  three-fourths  per  cent  for 
the  surviving  husband  or  wife,  eight  and  one-half  per  cent 
for  brothers  and  sisters,  and  from  ten  to  fifteen  per  cent  for 
more  distant  relatives;  while  for  amounts  in  excess  of  one 
million  francs  the  rates  were  graduated  according  to  re- 
lationship from  two  and  one-half  to  eighteen  and  one-half 
per  cent,  as  shown  in  the  following  table : 
1  Loi  dn  25  fev.  1901. 


195] 


FRANCE 


25 


0      . 

^. 

u 

6 

8  3 

eg 

0 

000 

lo      5       q 

0 

0 

lAi 

0 

0 

00 

g 

'    u 

Id 

V 

" 

Pk 

0    . 

_^ 

I 

0 

c 

u 

000 
10       tr>       uo 

8 

0 

C 

8 

8 

0 

N 

VO 

^4 

fO 

m 

t^ 

00 

0 

ll 

■^ 

"" 

" 

" 

"" 

^4 

CL, 

N4 

0 

^ 

0 

9  u 

a 

0 

0 

0 

0 

0 

0 

0 

0 

0 

4) 
U 

u-i        0 

c 

'O 

u^ 

VO 

in 

0" 

0  rt 

rJ 

VO 

t^ 

t< 

•«j- 

vC 

tA. 

0  i 

« 

0 

^ 

0 

a 

0 

0 

0 

0 

0 

0 

q. 

0 

01 

u-i        »r> 

0 

0 

c 

q 

0 

0  a 

w 

LO           0 

M 

■<;- 

>£ 

ti 

0 

cm 

IH 

M 

OOI 

c 

u^       0 

0 

a 

0 

0 

0 

0 

*>      c 

c 

"0 

u^ 

10 

10 

0' 

8^ 

t-l 

vo       0 

ro 

10 

■■6 

Ph 

8 

0 

0   u 
0  s 

000 
10       in       un 

8 

8 

§ 

8 

0- 

d  5 

krf 

"<1-            ON 

^ 

ro 

10 

^0 

u-l«»- 

Pk 

^ 

8  3 

0  c 

c 

10       0        0 

c 

0 

0 

0 

0 

0 

N       q       q 

10 

"^ 

VO 

10 

0 

0  2 

w             TT           OS 

d 

c 

'f 

10 

C4 

w 

^'^ 
^ 

. 

^ 

0 

8i 

g 

IT)           0 

8 

8 

8 

0 

q 

0    rt 

«       fo     00 

d 

M 

4 

iri 

M  J3 

b« 

•-* 

^ 

■2 

.2 

to 

(U 

bt) 

•s 

V 

& 

4J 

T3 
B 
rt 

V 

J. 
■3 

u 
■5 

1       ^ 
(4 

C 

■35 
3 
0 
0 

uT 

1) 

■^    B 
c4 

c  « 

0 

T 

(A 

C 

u 

u 

a 

1- 
)         c 

0 

:       c 
? 

Cue 

'S 
-a 

*o 
<u 

u 

c 
a 

»           C8 

(4 

1             CA 

c 

3 

2 

C 

E 

> 

'       "^ 

s 

& 

^0 

J 

c 

C! 

4J 

C4 

bc 

•S 

1: 

'           « 

•T3  J3 

C 

J    a 

:    ff 

)       D 

0 

(ii 

PJ 

26 


THE  INHERITANCE  TAX 


[196 


The  following  year  ^  the  progressive  principle  was  ex- 
tended to  still  larger  amounts  as  shown  below,  the  maximum 
rates  being  increased  to  five  per  cent  for  direct  heirs  and 
twenty  and  one-half  per  cent  for  strangers.  The  former 
maxima  were  applied  to  amounts  between  one  and  two  mil- 
lion francs,  except  that  the  rate  for  direct  heirs  was  in- 
creased to  three  per  cent  in  such  cases: 


Direct  line 

Husband  or  wife 

Brothers  and  sisters 

Uncles  and  aunts,  nephews  and 
nieces 

Great-uncles  and  great-aunts, 
grand-nephews  and  grand- 
nieces,  cousins-german 

Relatives  of  the  5th  and  6th 
degrees 

Relatives  beyond  the  6th  degree 
and  strangers  in  blood.  • 


1,000,001 

to 

2,000,000 

francs. 

2,000,001 

to 

5,000,000 

francs. 

5,000,001 

to 

10,000,000 

francs. 

10,000,001 

to 

50,000,000 

francs. 

Per  cent. 

Per  cent. 

Per  cent. 

Per  cent. 

3.00 

3-5° 

4.00 

4.50 

7.00 

7-5° 

8.00 

8.50 

12.00 

12.50 

13.00 

13.50 

13.5° 

14.00 

14-50 

15.00 

15.50 

16.00 

16.50 

17.00 

17.50 

18.00 

18.50 

19.00 

18.50 

19.00 

19-50 

20.00 

Over 

50,000,000 

francs. 


Per  cent. 
5.00 
9.00 
14.00 

15-50 

17.50 
19.50 
20.50 


The  value  of  usufructs  and  of  reversionary  interests  is 
calculated  in  the  following  manner:  If  the  usufructuary  is 
less  than  twenty  years  of  age,  a  life  interest  is  deemed  to  be 
worth  seven-tenths  and  the  reversionary  interest  three-tenths 
of  the  value  of  the  property.  Above  that  age  the  value  of 
the  usufruct  is  diminished  and  that  of  the  reversionary 
interest  increased  one-tenth  for  each  period  of  ten  years, 
up  to  the  age  of  seventy  years,  beyond  which  age  the  usu- 


1  Loi  du  30  mars  1902. 


197]  FRANCE  27 

fruct  is  uniformly  valued  at  one-tenth.  A  usufruct  for  a 
fixed  period  is  calculated  at  two-tenths  of  the  value  of  the 
property  for  each  ten  years  of  the  duration  of  the  usufruct. 

While  the  French  statutes  make  no  provision  for  exempt- 
ing small  inheritances,  it  has  been  decided  that  alms  given 
by  will  are  exempt  from  the  succession  tax.^ 

III.  Incidental  and  Supplementary  Taxes 
There  are  still  various  minor  taxes  incidental  to  the  set- 
tlement of  an  estate:  the  will  is  subject  to  a  uniform  regis- 
tration duty  of  9  francs  37^  centimes,  including  the  exist- 
ing dccimes;  when  legacies  are  released  by  the  heir-at-law, 
even  if  the  release  is  verbal,  a  proportional  tax  of  twenty- 
five  centimes  per  hundred  francs  of  the  amount  or  value 
of  the  legacy  is  payable ;  partitions  of  legacies  made  to  two 
or  more  persons  jointly  are  subject  to  a  tax  of  18%  cen- 
times per  hundred  francs;  and  there  are  stamp  taxes  on  the 
various  legal  papers  used,  including  the  will  (although  it 
pays  registration  duty  also),  the  amount  of  which  varies  ac- 
cording to  the  number  and  length  of  such  documents  em- 
ployed in  each  particular  case.  Heirs  must  even  pay  for 
the  printed  forms  on  which  they  are  required  to  declare 
their  inheritances.  These  incidental  charges  are  of  little 
consequence  in  the  settlement  of  large  estates,  but  may  easily 
absorb  five  or  six  per  cent  of  a  small  property." 

The  taxes  on  the  transfer  of  property  at  death  are  sup- 
plemented by  taxes  on  gifts  and  on  lands  held  by  corpora- 
tions. The  tax  on  gifts  is  still  a  proportional  tax,  but  it 
varies  not  only  according  to  relationship,  but  also  accord- 
ing to  the  occasion  of  the  gift,  special  favor  being  shown 

1  Wahl,  Traite  de  droit  fiscal,  p.  341. 

2  Baudry-Lacantinerie,  Traite  dc  droit  civil,  2d  ed.,  10:  442,  485,  486; 
Wahl,  Traite  de  droit  iiscal,  p.  478. 


28  THE  INHERITANCE  TAX  [198 

to  partitions  among  the  donors'  children  or  descendants  and 
to  marriage  contracts.  The  rates  for  direct  heirs  are  1.7 
per  cent  in  case  of  partition,  two  per  cent  by  marriage  con- 
tract, and  33/2  per  cent  in  other  cases.  Other  than  direct 
heirs  pay  at  the  following  rates : 

By  marriage  In  other 

contract.  cases. 

Per  cent.  Per  cent. 

Husband  or  wife 3.5  5 

Brothers  and  sisters 7  9 

Uncles  and  aunts,  nephews  and  nieces 8  lO 

Great-uncles    and  great-aunts,   grand-nephews   and 

grand-nieces,  and  cousins  german 9  n 

Relatives  of  the  fifth  and  sixth  degrees 10  12 

More  distant  relatives  and  strangers  in  blood 11  13.5 

Both  gifts  and  legacies  to  departments  and  to  communes, 
in  so  far  as  they  are  assigned  by  the  donor  to  works  of 
assistance,  and  gifts  and  legacies  to  public  charitable  es- 
tablishments, societies  of  mutual  aid,  etc.,  and  to  societies 
of  free  instruction  and  of  popular  education  receiving  sub- 
ventions from  the  state,  are  subject  to  a  proportional  tax 
of  nine  per  cent. 

The  tax  on  the  immovable  property  of  corporations  was 
introduced  in  1849,  to  complete  the  system  of  taxes  on  the 
trafisfer  of  property.  It  was  argued  that  corporations 
rarely  alienated  their  lands,  and  never  died;  they  should 
therefore  pay  a  tax  equivalent  to  a  year's  rental  as  often  as 
other  lands  were  transferred  on  the  average,  or  once  in 
twenty  years.  So  the  law  provided  for  an  annual  tax  of 
about  one-twentieth  of  the  rental  value.  For  convenience, 
the  amount  of  the  tax  was  to  be  found  by  multiplying  the 
land  tax  {contribution  fonciere)  by  .625,  which  gave  a 
product  slightly  in  excess  of  five  per  cent  of  the  annual 
rental.     The  multiplier  was   afterwards   raised  to   .7,   and 


199]  FRANCE  29 

two  and  a  half  decimes  were  added,  making  it  .875.  This 
tax  is  payable  in  addition  to  the  land  tax  on  lands  belong- 
ing to  all  legally  authorized  organizations,  including  in- 
corporated companies,  religious  congregations,  charitable 
institutions,  and  even  the  departments  and  communes.  But 
companies  organized  for  the  exclusive  purpose  of  buying 
and  selling  land  are  not  required  to  pay  this  tax  on  lands 
which  are  intended  to  be  sold/ 

In  all  civil  societies  or  associations  which  admit  new 
members,  the  accretions  or  increments  of  property  {accrois- 
semcnts)  falling  in  consequence  of  clauses  of  reversion 
from  the  shares  of  those  ceasing  to  take  part  to  the  profit 
of  the  remaining  members  were  subjected  in  1880  to  the 
succession  tax  in  the  case  of  accretions  by  death,  and  to 
the  tax  on  gifts  in  the  case  of  those  effected  otherwise. 
This  droit  d'accroissement  was  afterward  converted  into 
an  annual  tax  on  the  gross  value  of  the  property,  movable 
and  immovable,  held  by  religious  congregations,  communi- 
ties and  associations,  whether  authorized  or  not,  and  by 
other  societies  and  associations  which  do  not  distribute  their 
profits  in  whole  or  in  part  among  their  members.  Property 
acquired  with  the  authorization  of  the  Government,  in  so 
far  as  it  has  been  appropriated  and  continues  to  be  really 
devoted  either  to  works  of  free  assistance  in  behalf  of  the 
infirm,  the  sick,  the  poor,  orphans,  or  abandoned  children, 
or  to  the  work  of  French  missions  abroad,  is  exempted. 
This  tax,  which  is  not  subject  to  decimes,  is  fixed  at  30  cen- 
times per  hundred  francs  of  the  gross  value  of  the  prop- 
erty; but  the  rate  is  increased  to  40  centimes  for  landed 
property  held  by  those  congregations,  communities,  and  as- 

1  Lois  du  20  fev.  1849,  du  30  mars  1872,  du  20  dec.  1872,  et  dii  30  dec. 
1873. 


30  THE  INHERITANCE  TAX  [200 

sociations  which  are  not  subject  to  the  mortmain  tax  estab- 
lished in  1849.^ 

IV.  Revenues  and  Proposed  Increase 
In  1890  the  tax  on  successions  amounted  to  191,171,820 
francs,  showing  an  increase  of  more  than  20,000,000  francs 
over  the  previous  year.  At  the  time,  the  increase  was  as- 
cribed in  part  to  the  epidemic  of  influenza  which  prevailed 
during  a  part  of  the  year;  but  the  receipts  for  succeeding 
years  showed  a  continued  increase,  rising  to  225,000,000 
francs  even  before  the  law  of  1901  was  enacted,  and  to 
262,959,500  francs  in  1905.  The  product  of  the  tax  on 
gifts  varies  but  little  from  year  to  year;  it  approximates 
23,000,000  francs.  The  receipts  from  both  taxes  for  the 
years  1903-1905  are  shown  below: 

1903.  1904.  1905. 

Francs.  Francs.  Francs. 

Tax  on  successions 233,104,500  243.890,500  262,959,500 

Tax  on  gifts 23,012,000  22,526,000  22,658,500 

Total 256,116,500        266,416,500        285,618,000 

In  view  of  the  need  for  increased  revenues,  in  the  budget 
for  1907  the  Minister  of  Finance,  M.  Poincare,  proposed 
to  increase  by  30  per  cent  the  tax  on  all  inheritances  of  more 
than  10,000  francs  and  on  gifts  inter  vivos,  and  then  to 
add  a  decime  to  these  increased  duties,  making  the  total  in- 
crease about  43  per  cent.  He  also  proposed  to  extend  the 
application  of  the  progressive  principle  by  including  in  the 
schedule  of  rates  three  additional  categories  for  inherit- 
ances above  50,000,000  francs,  making  the  excess  above 
100,000,000  francs  pay  more  than  the  part  between  50,- 
000,000  and  100,000,000  francs,  and  the  excess  above  250,- 

1  Loi  du  16  avril  1895,  arts.  3  and  4;  loi  du  29  dec.  1884,  art.  9. 


201  ]  FRANCE  21 

000,000  francs  pay  at  a  still  higher  rate.  This  would  have 
made  the  maximum  rate  for  direct  heirs,  including  the  pro- 
posed decime,  8.8  per  cent,  and  for  distant  relatives  and 
strangers,  31.35  per  cent.^  The  budget  speech  was  re- 
ceived with  much  applause  in  the  Chamber  of  Deputies,  but 
the  heavy  taxes  proposed  naturally  provoked  severe  criti- 
cism,^ and  they  were  rejected  by  the  Budget  Committee. 

^  Bulletin  de  statistique  et  dc  legislation  comparee,  July,  1906,  pp.  22- 
77.  The  rates  appearing  in  the  bill  do  not  in  all  cases  show  an  increase 
of  exactly  30  per  cent.  The  maxima  given  above  are  based  upon  the 
bill  rather  than  upon  the  budget  speech.  The  Minister  of  Finance 
stated  that  by  limiting  the  increase  to  amounts  exceeding  10,000  francs 
only  six  per  cent  of  all  heirs  would  be  affected  by  the  increase,  which 
was  estimated  to  be  sufficient  without  the  proposed  decline  to  add  60,- 
830,000  francs  to  the  annual  receipts.  The  corresponding  increase  in 
the  tax  on  gifts  was  estimated  to  produce  6,797,000  francs. 

2  Especially  by  Leroy-Beaulieu  in  the  Economiste  Frangais  and  in  the 
Revue  des  Deux  Mondes  for  August  15,  1906;  though  curiously  enough 
he  overlooked  or  ignored  part  of  the  proposed  increase. 


CHAPTER  III 

GERMANY 

I.  State  Inheritance  Taxes 

The  inheritance  tax  made  its  appearance  in  various 
parts  of  Germany  during  the  seventeenth  century — in 
the  city  of  Hamburg  and  the  principahty  of  Brunswick- 
Liineburg  as  early  as  1624.  Brunswick-Liineburg  levied 
the  fiftieth  penny  of  collateral  inheritances  "  for  the 
increase  of  the  public  treasure."  Doubt  seems  to  have 
arisen  whether  this  exaction  applied  to  legacies,  but  finally 
they  were  included;  and  when  difficulty  was  experienced 
in  enforcing  the  tax,  provision  was  made  for  paying  an  in- 
formation fee  to  those  reporting  to  the  authorities  deaths 
of  which  the  latter  were  ignorant.  Hamburg  imposed  a 
•ten  per  cent  tax  on  heirs  more  remote  than  the  decedent's 
nephews  and  nieces.  Property  which  went  out  of  the  city 
to  reach  the  heirs  for  whom  it  was  intended  had  paid  such 
a  tax  ever  since  1529,  and  in  order  to  restore  this  ancient 
discrimination  the  tax  on  local  heirs  was  reduced  in  1735 
to  five  per  cent.  Baden-Durlach  limited  intestate  inherit- 
ance to  ten  degrees  of  relationship,  and  required  heirs  be- 
yond the  seventh  degree  to  pay  a  tax  of  ten  per  cent.  In 
Brandenburg  Frederick  William  introduced  a  stamp  tax  on 
testaments,  etc.,  while  in  the  city  of  Rostock  a  two  per  cent 
tax  on  collateral  heirs,  established  in  1669,  has  continued 
in  force  to  the  present  day,  in  addition  to  the  state  inheri- 
tance tax  levied  by  Mecklenburg-Schwerin.      During  the 

eighteenth  century  inheritance  taxes  were  introduced  in  sev- 
32  [202 


203]  GERMANY  33 

eral  of  the  Thuringian  states  for  the  support  of  orphan 
asylums  and  houses  of  correction.^ 

Prior  to  the  adoption  in  1906  of  an  Imperial  inheritance 
tax,  all  of  the  German  states  except  the  principality  of 
Waldeck  levied  separate  inheritance  taxes  for  state  pur- 
poses. The  rates  are  shown  in  the  table  ^  on  the  follow- 
ing page.  Direct  descendants  were  exempt  except  in 
Alsace-Lorraine  and,  in  recent  years,  in  Hamburg,  Bremen, 
and  Liibeck;  but  parents  and  grandparents  were  taxed  in 
nearly  half  the  states.  Where  direct  descendants  were  taxed 
at  all,  they  were  favored  with  larger  exemptions  as  well  as 
lower  rates  than  other  relatives,  and  the  most  recent  laws 
were  especially  favorable  to  minor  children.  Thus,  Liibeck 
taxed  minor  or  dependent  children  and  the  widow  of  the  de- 
cedent only  if  the  inheritance  exceeded  eight  thousand 
marks,  though  other  direct  heirs  were  taxed  when  the 
amount  exceeded  four  thousand  marks.  Bremen  made  a 
still  more  elaborate  distinction,  the  general  exemption  of 
three  thousand  marks  for  descendants  being  increased  by 
five  hundred  marks  for  each  year  the  heir  lacked  of  being 
twenty-one  years  of  age,  with  a  maximum  exemption  of 
ten  thousand  marks  for  young  children  and  for  those  un- 
able to  earn  a  livelihood.  As  in  some  of  the  other  states, 
the  surviving  husband  or  wife  was  wholly  exempt  if  there 
were  children,  but  otherwise  was  taxed  if  the  amount  ex- 
ceeded five  thousand  marks.  In  calculating  the  value  of 
direct  inheritances,  where  they  were  taxed,  no  account  was 
taken  of  house  furnishings,  clothing,  etc.  Domestic  ser- 
vants were  very  commonly  favored  with  generous  exemp- 
tions and  lower  rates,  at  least  on  life  annuities  or  pensions. 

1  Schanz  in  Finans-Archiv,  17:  54-61,  69-77. 

2  Compiled  from  the  tables  given  by  Schanz  in  Finans-Archiv.  18: 
679-695,  and  from  the  more  recent  statutes  of  Anhalt,  Bremen,  Ham- 
burg, Liibeck,  Reuss  (younger  line),  Saxe-Coburg,  and  Saxe-Gotha. 


34 


THE  INHERITANCE  TAX 


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205l  GERMANY  ,e 

Progressive  rates  are  a  recent  development  in  Germany. 
Schaumburg-Lippe  had  a  slightly  progressive  collateral-in- 
heritance tax  as  early  as  1811,  but  the  maximum  rate  was 
only  three  per  cent,  and  the  progressive  feature  was  omitted 
from  the  law  of  1880.  The  recent  progressive  movement 
began  in  a  small  way  in  Baden  in  1899,  grandparents  being 
taxed  two  per  cent  instead  of  one  when  the  amount  ex- 
ceeded five  thousand  marks,  and  certain  collateral  relatives 
four  per  cent  instead  of  three  on  amounts  over  three  thous- 
and marks.  More  complete  applications  of  the  progressive 
principle  were  made  by  Hamburg  and  Liibeck  in  1903,  by 
Bremen  in  1904,  and  by  Anhalt  and  Reuss  (younger  line) 
in  1905,  the  rate  on  all  inheritances  of  more  than  fifty 
thousand  marks  being  subjected  to  additions  of  five  or  ten 
per  cent  for  each  fifty  thousand  or  one  hundred  thousand 
marks,  up  to  a  maximum  of  one  and  one-half  or  two  times 
the  basic  rate. 

In  most  of  the  states  gifts  inter  vivos  were  taxed  like 
inheritances,  but  in  some  cases  they  were  taxable  only  when 
made  in  contemplation  of  death,  or  when  formally  authen- 
ticated. 

Bavaria  has  the  beginning  of  a  tax  on  corporations  as  a 
substitute  for  the  inheritance  tax;  the  real  estate  of  juristic 
persons,  except  charitable  and  religious  institutions,  is  sub- 
ject to  a  tax  of  one  per  cent  once  in  twenty  years. 

II.  Germany — The  Imperial  Law  of  1906 

An  inheritance  tax  for  the  Empire  has  been  discussed  for 
many  years,  but  was  not  deemed  wholly  appropriate  until 
after  the  adoption  of  the  civil  code  establishing  a  uniform 
law  of  inheritance  throughout  Germany.  The  law  of  June 
3d,  1906,^  imposes  an  imperial  inheritance  tax  at  the  fol- 
lowing basic  rates  : 

^  Reichsgesetzblatt,  1906,  Nr.  31. 


36  THE  INHERITANCE  TAX  [206 

Per  cent. 

Parents,  brothers  and  sisters  and  their  children 4 

Grand-parents  and  more  distant  ancestors,  parents-in-law  and 
step-parents,  children-in-law  and  step-children,  grand-nephews 
and  grand-nieces,  illegitimate  children  acknowledged  by  the 
fathers  and  their  offspring,  adopted  children  and  their  off- 
spring      6 

Brothers  and  sisters  of  parents,  and  relatives  by  marriage  in  the 
second  degree  in  collateral  lines 8 

In  other  cases lO 

The  tax  is  progressive,  the  rates  given  above  being  in- 
creased in  the  case  of  inheritances  over  20,000  marks  by 
one-tenth  for  each  further  sum  at  first  of  20,000  or  25,000 
marks  and  afterward  of  50,000  or  100,000  marks.  For 
amounts  over  one  milhon  marks  the  tax  is  levied  at  two  and 
one-half  times  the  basic  rates,  making  the  maximum  rate 
twenty-five  per  cent.  In  the  case  of  the  immediate  relatives 
subject  to  the  four  per  cent  rate,  the  progression  applies 
only  when  the  value  of  the  inheritance  is  more  than  50,000 
marks.  On  large  amounts  the  German  tax  is  considerably 
heavier  than  the  French,  because  the  progressive  rates  ap- 
ply to  the  entire  amount  of  the  inheritance,  not  merely  to 
their  respective  fractions ;  but  when  an  inheritance  is  valued 
at  a  sum  slightly  in  excess  of  that  to  which  a  lower  rate  ap- 
plies the  higher  rate  will  be  collected  only  in  so  far  as  it  can 
be  paid  out  of  half  the  amount  by  which  the  inheritance  ex- 
ceeds the  preceding  class  limit. 

It  will  be  observed  that  children  and  other  direct  descen- 
dants are  exempt,  as  they  were  in  most  of  the  German 
states.  All  inheritances  of  less  than  five  hundred  marks  are 
exempt,  and  the  exemption  is  increased  to  ten  thousand 
marks  for  parents,  grandparents,  and  adopted  children,  and 
to  three  thousand  marks  for  employees  of  the  deceased.  Ob- 
jects given  by  parents,  grandparents,  etc.,  to  their  offspring 
are  not  taxable  when  reverting  by  inheritance  to  the  donors; 
and   house   furnishings,    clothing,   etc.,    passing  to   certain 


207]  GERMANY  37 

near  relatives  are  exempt  to   the  value  of  five  thousand 
marks. 

Land  and  buildings  used  continuously  in  agriculture  or 
forestry  are  favored  with  a  reduction  of  one-fourth  from 
the  rate  applicable  to  other  property,  and  the  valuation  of 
such  property  is  based  wholly  upon  the  profits  derived  from 
it,  the  value  being  taken  as  twenty-five  times  the  net  pro- 
ceeds which  the  property  can  yield  with  ordinary  cultivation 
in  the  manner  in  which  it  has  been  previously  conducted. 
Bequests  to  German  churches,  trust  funds,  societies,  and 
institutions  exclusively  religious  or  charitable  or  for  the 
public  good,  and  those  made  to  funds  or  institutions  for  the 
support  of  employees  of  the  deceased  and  their  families,  are 
taxed  only  five  per  cent,  with  an  exemption  of  five  thousand 
marks  in  favor  of  churches. 

Debts  of  the  deceased,  the  expenses  of  burial,  including 
the  cost  of  the  tombstone,  and  the  expenses  of  administra- 
tion of  the  estate,  are  deducted.  Exemption  is  accorded  to 
the  nearest  relatives  in  the  direct  line  when  the  real  prop- 
erty has  been  subject  to  inheritance  tax  within  five  years, 
and  if  the  last  inheritance  tax  was  between  five  and  ten 
years  previous  an  abatement  of  fifty  per  cent  is  allowed. 

The  tax  applies  to  gifts  inter  vivos  at  the  same  rates  as 
to  inheritances ;  and  in  order  that  the  higher  rates  may  not 
be  evaded  by  dividing  large  gifts  into  numerous  small  ones, 
it  is  provided  that  such  separate  grants,  made  within  five 
years  to  the  same  person,  may  be  treated  as  one  grant. 
Gifts  to  needy  individuals  to  provide  for  their  living  ex- 
penses or  their  education  or  the  cancelation  of  demands 
upon  them  are  exempt,  as  also  are  gifts  of  articles  of  per- 
sonal use  not  exceeding  three  thousand  marks  in  value  to 
near  relatives  of  the  donor. 

The  value  of  life  estates  and  annuities  is  calculated  for 
persons  not  over  twenty-five  years  of  age  at  twenty  times 
the  annual   value.     The  multiplier   is   diminished  by   two 


38  THE  INHERITANCE  TAX  [208 

for  every  additional  ten  years  of  age  up  to  sixty-five  years 
and  for  every  five  years  thereafter,  individuals  above  eighty 
years  of  age  paying  four  times  the  annual  value. 

Following  the  practice  of  the  separate  states,  the  German 
Empire  levies  its  inheritance  tax  on  all  real  estate  within  its 
borders,  without  regard  to  the  residence  of  the  decedent, 
and  on  the  personal  property  of  German  decedents,  and  on 
personal  property  in  Germany  passing  to  heirs  domiciled 
there  in  so  far  as  in  the  country  of  the  decedent  the  prop- 
erty of  German  decedents  is  taxed  under  similar  circum- 
stances; but  any  inheritance  tax  paid  in  a  foreign  country 
on  personal  property  will  be  deducted  from  the  tax  payable 
in  Germany. 

Two-thirds  of  the  proceeds  of  this  tax  will  go  to  the 
Empire,  and  one-third  is  to  be  retained  by  the  states  in 
which  it  is  collected.  Until  the  close  of  the  fiscal  year 
1910,  however,  each  state  is  to  receive  at  least  the  amount 
of  its  average  revenue  from  inheritance  taxes  correspond- 
ing to  the  Imperial  tax  during  the  years  1901-1905.  The 
states  still  have  the  option  of  taxing  direct  inheritances, 
which  are  left  untaxed  by  the  Imperial  law,  and  also  of  im- 
posing additional  taxes  upon  collateral  heirs ;  but  the  Im- 
perial rates  are  in  general  so  much  higher  than  any  to  which 
■the  German  states  are  accustomed  that  they  are  not  likely 
to  avail  themselves  of  the  privilege,  excepting  perhaps  the 
few  states  which  had  inaugurated  the  taxation  of  direct 
heirs.  On  the  average,  the  states  will  be  nearly  as  well  off 
in  any  case  under  the  Imperial  law  as  when  they  imposed 
their  own  inheritance  taxes ;  for  the  new  law  is  expected 
to  produce  nearly  three  times  as  much  revenue  as  the  separ- 
ate state  laws.  In  1904  the  states  of  Germany  collected 
inheritance  taxes  to  the  amount  of  26,930,000  marks;  the 
Imperial  tax  is  expected  to  yield  72,000,000  marks  a  year, 
of  which  48,000,000  marks  will  ultimately  go  to  the  central 
government,  leaving  the  states  24,000,000  marks. 


CHAPTER  IV 

SWITZERLAND 

I.  Historical  Development  and  Rates  in  Force 

As  long  ago  as  1680  Geneva  imposed  a  legacy  tax  on 
persons  not  heirs  by  the  intestate  law;  and  in  Glarus  the 
communes,  or  many  of  them,  had  a  Todesfallsteiier  or  death 
tax  for  the  benefit  of  their  churches  or  schools  long  before 
the  canton  itself  imposed  an  inheritance  tax.  Elsewhere  in 
Switzerland  the  inheritance  taxes  are  of  comparatively  mod- 
ern origin.  The  Helvetic  Republic,  by  a  law  of  1798,  es- 
tablished a  national  tax  on  collateral  inheritances  and  gifts 
as  a  part  of  its  system  of  transfer  taxes.  The  tax  was 
graduated  from  one-half  of  one  per  cent  for  brothers  and 
sisters  to  five  per  cent  for  distant  relative  and  strangers.  A 
law  of  1800  increased  the  maximum  to  six  per  cent.  When 
Switzerland  was  again  divided  into  separate  states,  a  num- 
ber of  them  retained  this  tax  in  a  modified  form,  while 
others  abandoned  it.  The  nineteenth  century  witnessed 
many  changes  in  the  laws  of  the  various  cantons,  tending 
for  the  most  part  to  the  further  development  of  the  tax. 
The  annual  product  of  the  inheritance  and  gift  taxes  for 
the  whole  of  Switzerland  increased  in  the  forty  years  from 
1856  to  1896  from  521,000  to  4,359,000  francs,  an  in- 
crease due  largely  to  the  enactment  of  new  tax  laws  and  the 
more  extended  application  of  old  ones.^ 

1  Schanz,  Die  Stetiern  der  Schzveis;  de  Cerenville,  Les  impots  en 
Suisse,  pp.  212-218;  Kruger,  Die  Erbschaftssteiier,  p.  16. 

209]  39 


40  THE  INHERITANCE  TAX  [210 

The  Swiss  cantons  were  pioneers  in  the  introduction  of 
progressive  inheritance  taxes.  Geneva  imposed  such  a  tax 
as  long  ago  as  1794,  but  this  was  discontinued  after  a  two 
years'  trial.  Solothurn  and  Thurgau  adopted  progressive 
rates  about  the  middle  of  the  nineteenth  century,  and 
Zurich  followed  their  example  in  1869.  Inheritances  are 
taxed  to  a  greater  or  less  extent  in  nearly  all  the  cantons, 
and  in  ten  cases  the  rates  are  now  progressive.  Direct 
descendants  are  exempt  except  in  Geneva  and  a  few  of  the 
smaller  cantons.  The  maximum  rate  varies  from  ten  per 
cent  in  several  cases  to  twenty  per  cent  in  Aargau,  Neu- 
chatel  and  Schaffhausen,  twenty-four  per  cent  in  Solo- 
thurn, twenty-five  per  cent  in  Basel-Land  and  thirty  per 
cent  in  St.  Gall  while  the  little  canton  of  Uri  discriminates 
against  intestacy  with  even  higher  rates.  The  following 
table  shows  the  rates  in  force  in  the  different  cantons : 


2Il] 


SWITZERLAND 


41 


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42  THE  INHERITANCE  TAX  [212 

In  several  cantons  the  proceeds  are  set  aside  in  whole  or 
in  part  for  educational  and  charitable  purposes.  Deduction 
for  debts,  at  least  within  certain  limits,  is  allowed  every- 
where except  in  Zurich.  In  most  cases  the  inheritance  tax 
is  accompanied  by  a  tax  on  gifts  inter  vivos;  and  some 
cantons  improve  the  opportunity  afforded  by  the  settle- 
ment of  estates  to  collect  back  taxes  in  cases  where  fraud 
is  discovered. 

II.  Cantons  Having  Progressive  Taxes 

In  Solothiirn,  where  the  progressive  principle  was  intro- 
duced in  1848,  the  basic  rates  of  three  to  twelve  per  cent 
apply  only  to  amounts  between  one  hundred  and  five  thous- 
and francs.  Inheritances  of  less  than  one  hundred  francs 
are  taxed  at  one-half  these  rates.  On  the  other  hand,  the 
rates  are  increased  by  one-fourth  for  each  additional  five 
thousand  francs,  so  that  an  inheritance  of  20,000  francs 
pays  double  the  regular  percentage;  the  progression  ceases 
at  this  point.  Charitable  and  educational  institutions  and 
churches  are  not  entirely  exempt,  but  pay  only  one  per  cent. 

In  Thurgau  the  progressive  scale  is  the  same  as  in  Solo- 
thurn,  except  that  the  increase  is  a  little  less  rapid ;  amounts 
less  than  212  francs  pay  only  one-half  of  the  nominal  rate, 
and  the  maximum  rates  apply  to  amounts  of  25,000  francs 
or  more. 

Zurich  provides  for  progression  on  similar  principles, 
but  in  a  less  marked  degree.  The  rate  is  increased  by  one- 
tenth  for  each  10,000  francs  until  it  becomes  five-tenths 
higher  than  the  original  rate. 

Bent  has  adopted  the  principle  of  progression  only  to  a 
slight  extent;  on  any  excess  above  50,000  francs  the  rate 
is  increased  one-half.  Direct  descendants,  public  institu- 
tions, and  certain  private  institutions  are  exempt ;  so  also  is 
the  surviving  husband  or  wife  in  case  there  are  children. 


213]  SWITZERLAND  4-, 

The  inheritance  of  a  childless  husband  or  wife  is  taxed  only 
when  it  exceeds  5,000  francs;  that  of  any  other  taxable  per- 
son, when  it  exceeds  1,000  francs.  One-tenth  of  the  pro- 
duce of  the  tax  goes  to  the  commune  in  which  the  decedent 
lived,  for  school  purposes. 

In  Schaffhausen  the  rates  are  increased  one-tenth  for 
amounts  between  2,000  and  10,000  francs,  and  there  is  a 
further  increase  of  one-tenth  for  every  additional  10,000 
francs  up  to  90,000,  all  successions  above  that  amount  pay- 
ing double  the  schedule  rate.  The  first  200  francs  in  each 
share  are  left  out  of  the  reckoning.  Bequests  for  public 
purposes  are  exempt,  as  are  also  bequests  to  servants  of  a 
year's  standing  if  not  in  excess  of  1,000  francs.  Half  the 
receipts  are  set  aside  each  year  for  special  funds  of  the 
canton;  in  1889,  for  example,  this  part  went  to  the  poor 
fund. 

Uri  discriminates  against  intestacy  by  taxing  the  intes- 
tate successions  of  distant  relatives  more  heavily  than  be- 
quests, even  to  strangers  in  blood.  The  intestate  rates  for 
collateral  relatives  increase  from  one  per  cent  for  brothers 
and  sisters  to  twenty-five  per  cent  for  distant  relatives;  but 
the  maximum  rate  for  bequests  is  five  per  cent.  These  rates 
are  increased  one-tenth  for  each  10.000  francs,  up  to  200,- 
000  francs.  Hence  in  the  case  of  a  large  amount  acquired 
by  intestate  succession,  the  twenty-five  per  cent  rate  for  dis- 
tant relatives  would  grow  to  seventy-five  per  cent.  This 
is  the  highest  rate  to  be  found  in  any  country ;  but  practically 
it  is  of  very  little  importance,  because  well-to-do  persons 
without  near  relatives  are  not  likely  to  die  intestate.  As  a 
matter  of  fact,  de  Cerenville  states  that  the  maximum  rate 
has  never  been  imposed ;  he  calls  it  an  "  exorbitant  preten- 
sion." In  Uri  one-third  of  the  proceeds  of  the  tax  goes  to 
the  communes  for  the  support  of  schools  and  the  poor. 

Basel  Land  increases  its  rates  by  tenths,  up  to  a  maximum 


44  THE  INHERITANCE  TAX  [214 

of  two  and  a  half  times  the  nominal  rate  for  amounts  over 
400,000  francs. 

In  St.  Gall  the  rates  are  increased  one  per  cent  for  each 
thousand  francs,  up  to  three  times  the  basic  rates.  Ser- 
vants of  the  deceased  are  exempt  up  to  two  thousand  francs, 
and  direct  heirs  up  to  ten  thousand  francs. 

In  Giants  and  Zitg  the  rates  increase  by  arithmetical  pro- 
gression. In  Glarus,  for  example,  the  second  10,000  francs 
of  an  inheritance  is  taxed  2.1  per  cent  if  the  heir  is  a 
brother  of  the  deceased  and  10.  i  per  cent  if  there  is  no 
relationship.  The  additions  never  exceed  one  per  cent  of 
the  inheritance.  In  Zug  the  maximum  addition  is  two  per 
cent  of  the  inheritance;  that  is,  a  one  per  cent  rate  may  be 
increased  to  three  per  cent,  and  an  eight  per  cent  rate  to 
■ten  per  cent. 

III.  Other  Cantons 
The  Freiburg  law  of  1882  contains  some  curious  pro- 
visions. The  usual  effect  of  the  existence  or  non-existence 
of  children  upon  the  tax  paid  by  the  surviving  parent  is  in 
this  case  reversed;  the  husband  or  wife  pays  eight  per  cent 
in  case  the  deceased  leaves  legitimate  children,  brothers, 
sisters,  nephews,  nieces,  grandnephews,  or  grandnieces, 
otherwise  only  two  per  cent;  apparently  on  the  principle 
that  the  surviving  spouse  takes  what  rightfully  belong  to 
the  children  or  collateral  relatives.  The  same  principle  is 
carried  out  in  taxing  illegitimate  children  two  per  cent  if 
there  are  also  legitimate  children,  and  exempting  them  in 
other  cases.  If  one  collateral  relative  receives  by  will  more 
than  his  equal  share,  he  pays  an  additional  one  per  cent. 
The  rate  for  servants  is  four  per  cent,  the  rate  paid  also  by 
cousins.  Bequests  to  persons  who  are  on  the  poor-list  are 
exempt.  Certain  public  institutions,  which  formerly  paid 
two  per  cent,  were  relieved  of  the  tax  by  an  amendment  of 
the  law  in  1886. 


215]  SWITZERLAND  45 

For  a  number  of  years  Freiburg  had  a  progressive  tax, 
but  this  was  discontinued  in  1862,  when  the  tax  on  suc- 
cessions and  gifts  was  consolidated  with  the  registration 
taxes.  The  average  annual  yield  of  the  tax  is  about  78,000 
francs,  or  two-thirds  of  a  franc  for  each  inhabitant. 

Geneva,  with  its  two  per  cent  tax  on  direct  heirs,  derives 
more  revenue  from  its  inheritance  tax,  in  proportion  to 
population,  than  any  other  canton ;  the  average  yield  is  about 
ten  francs  per  inhabitant.  Direct  inheritances  of  three 
thousand  francs  and  others  of  fifty  francs  or  less  are 
exempt,  as  well  as  bequests  to  public  and  charitable  institu- 
tions. 

Basel  Town  amended  its  law  in  1887  so  as  to  tax  direct 
heirs,  who  were  formerly  exempt;  it  still  exempts  bequests 
for  public  and  benevolent  purposes,  bequests  to  persons  in 
the  employ  of  the  deceased,  inheritances  of  direct  descen- 
dants not  exceeding  two  thousand  francs,  and  those  of  other 
persons  not  exceeding  four  hundred  francs. 

The  law  of  Lucerne  has  a  curious  provision  taxing  ma- 
ternal grandparents,  uncles,  and  cousins  at  double  the  rate 
applying  to  the  corresponding  relatives  on  the  paternal  side 
— eight  per  cent  instead  of  four.  In  general,  amounts  of 
300  francs  or  less  are  exempt;  when  the  beneficiary  has 
been  a  servant  of  the  deceased  for  a  year  or  more,  the 
exemption  is  doubled.  All  bequests  to  charitable,  educa- 
tional and  other  public  institutions  are  exempt.  Half  the 
proceeds  are  used  for  school  purposes. 

Ncuchdtel  exempts  educational,  benevolent,  and  charitable 
institutions  recognized  by  the  state;  the  husband  or  wife, 
if  there  are  children;  bequests  to  servants  of  the  deceased, 
up  to  1,000  francs;  and  other  amounts  less  than  100  francs. 

Grisons  and  Nidzvald,  which  have  no  cantonal  inheritance 
tax,  give  their  communes  power  to  levy  such  taxes.  The 
only  cantons  having  no  inheritance  tax  for  either  general  or 


46  THE  INHERITANCE  TAX  [216 

local  purposes  are  Appenzel  Inner  Rhodes,  Schwyz,  Ob- 
wald,  and  Valais;  and  in  Valais  there  are  registration  duties 
incidental  to  the  settlement  of  estates. 

The  rule  in  Switzerland  is  that  personal  property  is 
taxed  in  the  canton  where  the  decedent  lived,  and  real  estate 
where  it  is  situated.  Reciprocal  agreements  to  prevent 
double  taxation  have  been  made  with  some  foreign  gov- 
ernments. 


CHAPTER  V 

OTHER  COUNTRIES 

I.  The  Netherlands 

The  origin  of  many  of  the  existing  inheritance  taxes 
may  be  traced  to  the  Netherlands,  where  this  form  of  taxa- 
tion was  introduced  before  the  end  of  the  sixteenth  century. 
In  1 59 1  Utrecht  imposed  a  tax  of  two  and  a  half  per  cent 
on  transfers  of  landed  property,  including  successions  go- 
ing to  collateral  relatives,  but  not  those  of  direct  heirs.  A 
similar  tax  was  introduced  in  Holland  in  1598,  and  the  fol- 
lowing year  Zealand  imposed  a  collateral-inheritance  tax  on 
movable  property  at  the  same  rate.  During  the  seventeenth 
century  the  rates  were  increased  from  time  to  time,  were 
extended  (at  least  in  Holland)  to  movable  property,  and 
were  to  some  extent  differentiated  according  to  the  degree 
of  relationship  between  the  decedent  and  the  heir;  and  the 
remaining  Dutch  provinces  imposed  similar  taxes,  in  some 
cases  mulcting  foreign  heirs  twice  as  heavily  as  their  own 
citizens.  Adam  Smith  described  "  the  Dutch  tax  upon  suc- 
cessions "  of  his  day  as  ranging,  according  to  the  degree  of 
collateral  relationship,  from  five  to  thirty  per  cent  of  the 
value  of  the  property,  successions  between  husband  and 
wife  being  taxed  only  the  fiftieth  penny,  or  two  per  cent. 
There  was  also  a  stamp  tax  on  wills,  varying  according  to 
the  value  of  the  property  involved  from  three  stivers  to 
300  florins.^ 

^  Wealth  of  Nations,  bk.  v,  chap,  ii,  pt.  ii,  appendix  to  articles  i  and  2. 
217]  47 


48  THE  INHERITANCE  TAX  [218 

In  1805  the  Batavian  Republic  imposed  a  collateral- 
inheritance  tax  ranging  from  five  to  ten  per  cent  according 
to  relationship,  the  maximum  rate  applying  to  bequests  and 
legacies  in  excess  of  an  heir's  intestate  portion.  Amounts 
of  less  than  300  florins  were  exempt/ 

The  vicissitudes  of  Dutch  history  have  resulted  in  many 
changes  in  fiscal  legislation  which  it  is  unnecessary  to  fol- 
low. The  succession-tax  law  now  in  force  prescribes  the 
following  rates : 

Per  cent. 

Direct  descendants,  and  husband  or  wife  with  living  issue I 

Direct  ancestors 3 

Brothers  and  sisters,  and  husband  or  wife  without  issue 4 

Uncles  and  aunts,  nephews  and  nieces,  great-uncles  and  great- 
aunts,  grand-nephews  and  grand-nieces 6 

Other  persons,  corporations,  and  all  collateral  relatives  on  the 
excess  above  the  intestate  portion 10 

The  debts  and  funeral  expenses  of  the  deceased  are  de- 
ducted. Successions  of  300  florins  or  less  are  exempt;  and 
in  the  case  of  direct  descendants,  or  a  husband  or  wife  with 
living  offspring,  successions  of  1000  florins  are  exempt  and 
500  florins  are  deducted  from  amounts  between  1000  and 
1500  florins. 

The  tax  just  described  is  that  which  applies  when  the 
decedent  was  a  resident  of  the  Netherlands;  on  real  estate 
left  by  foreign  decedents  the  rate  is  six  per  cent. 

In  the  case  of  stocks  or  interest-bearing  securities  an  ad- 
ditional transfer  tax  must  be  paid,  without  deduction  for 
debts,  at  the  rate  of  one-fourth  of  one  per  cent  for  direct 
heirs  and  two  per  cent  in  other  cases. 

To  the  nominal  rates  of  the  succession  and  transfer  taxes 

1  Schanz,  "  Studien  zur  Geschichte  und  Theorie  der  Erbschafts- 
steuer,"  Finanz-Archiv,  18:  55-62,  130-132. 


219] 


A  U  STRIA-HUN  GARY 


49 


shown  above  the  annual  finance  act  adds  a  certain  percent- 
age, which  for  many  years  has  been  38  per  cent. 

11.  Austria-Hungary 
A  ten  per  cent  collateral-inheritance  tax  was  introduced 
in  Austria  in  1759,  for  the  purpose  of  paying  the  public 
debt  resulting  from  the  Seven  Years'  War.  The  tax  was 
repeatedly  modified  during  the  first  century  of  its  existence. 
The  present  law,  which  has  been  in  force  since  1850,  taxes 
all  successions  and  gifts;  the  rate  for  landed  property  is  in 
every  case  one  and  one-half  per  cent  more  than  for  mov- 
ables, as  shown  below: 

Movables.  Immovables. 

Per  cent.  Per  cent. 

Direct  line,  husband  or  wife i  2j^ 

Servants,  on  bequests  not  exceeding  500  guilders. .   I  2j/$ 

Collateral  relatives  not  more  distant  than  cousins. .  4  SJ^ 

All  other  persons 8  95^ 

These  nominal  rates,  however,  are  increased  by  one-fourth. 
Sons-in-law,  daughters-in-law,  step-children,  and  adopted 
children  are  regarded  as  direct  heirs.  Debts  are  deducted 
as  far  as  possible  from  the  value  of  the  movables,  which  are 
subject  to  the  lower  rates. 

Besides  the  above  state  tax,  there  are  light  inheritance 
taxes  for  the  school  funds,  poor  funds,  etc.,  in  the  various 
provinces.  In  Lower  Austria  the  school  tax  is  progres- 
sive, beginning  at  one-fourth  of  one  per  cent  for  amounts 
under  one  thousand  florins,  and  is  also  increased  by  one- 
half  when  the  decedent  leaves  no  widow  nor  heirs  at  law. 
In  the  city  of  Vienna  there  is  also  a  progressive  inheritance 
tax  for  the  hospital  fund,  besides  a  light  transfer  tax  ap- 
plying to  real  esate  only ;  ^  and  certain  other  municipalities 


1  Journal  of  thenSociety  oMCoMAritive 


610  PACIFIC  MUTUAL  BUILDING 
LOS  ANGELES.  CALlt-ORNIA 


50  THE  INHERITANCE  TAX  [220 

also  levy   inheritance  taxes   in  aid   of  hospitals   and   poor 
funds. 

In  Hungary  the  rates  of  the  succession  tax  are  as  follows : 

Movables.  Immovables. 

Per  cent.  Per  cent. 

Direct  line i  2.5 

Husband  or  wife,  step-children,  adopted  children, 

illegitimate  children  and  their  descendants 1.3  3.2 

Other  relatives 5  6.9 

Austria  has  a  well-developed  system  of  mortmain  taxes 
in  lieu  of  the  inheritance  tax,  levied  once  in  ten  years  on  all 
corporate  property.  For  joint-stock  companies  the  rate  is 
one  and  one-half  per  cent;  for  corporations  in  which  the 
members  hold  no  shares,  such  as  churches,  charitable  in- 
stitutions, and  communes,  the  rate  is  three  per  cent.  Asso- 
ciations which  are  to  continue  not  longer  than  fifteen  years, 
or  only  during  the  lives  of  the  incorporators,  are  not  sub- 
ject to  the  tax.  When  there  is  doubt  as  to  the  value  of  the 
property,  the  average  income  of  the  corporation  for  the  ten 
years  is  taken  as  the  basis  of  capitalization  and  multiplied 
by  twenty;  so  that  the  tax  of  one  and  one-half  per  cent  of 
the  property  paid  once  in  ten  years  is  equal  to  an  annual  in- 
come tax  of  three  per  cent. 

III.  Italy 
The  political  unification  of  Italy  substituted  a  single  in- 
heritance tax  for  those  which  had  been  imposed  by  the  separ- 
ate states.  During  the  next  few  decades  the  rates  were 
several  times  increased,  and  in  1902  the  progressive  prin- 
ciple was  introduced  by  means  of  the  following  elaborate 
schedule : 


22l] 


ITALY 


51 


Direct  line 

Husband  or  wife. 


301 

to 

1,000 

lire. 


0.80 
3.00 


1,001 

to 

50,000 

lire 


1.60 
4.50 


Up  to  50,000  lire  1 


Brothers  and  sisters  . 
Uncles  and  nephews . 


Great-uncles  and    grand- 
nephews  


Other  relatives  up  to  the 
sixth  degree 


Relatives  beyond  the  sixth 
degree,  and  strangers . . 


7.00 
8.50 


12.50 
15.00 


50,001 
to 

1 00,00 1 
to 

250,001 
to 

500,001 
to 

100,000 
lire. 

250,000 
lire. 

500,000 
lire. 

1,000,000 
lire. 

% 

% 

% 

% 

2.00 

2.40 

2.80 

3.20 

5.00 

540 

5.80 

6.20 

7-5° 

8.00 

8.50 

9.25 

9.25 

10.00 

11.00 

12.00 

10,80 

11.60 

12.60 

13.80 

13-50 

14.50 

15.70 

16.80 

16.30 

17.60 

19.00 

20.50 

Beyond 

1 ,000,000 

lire. 


% 

3.60 

6.60 


10.00 
13.00 

15.00 


The  rates  shown  in  the  table  apply  only  to  their  respec- 
tive fractions  of  the  inheritance.  Amounts  of  300  lire  or 
less  passing  to  direct  heirs  or  to  the  surviving  husband  or 
wife  are  subject  only  to  a  nominal  tax  of  one  lira;  but  not 
even  the  immediate  family  is  wholly  exempt  except  when 
the  net  value  of  the  estate  falls  below  lOO  lire.  Bequests 
to  charitable  institutions  are  taxed  at  a  proportional  rate  of 
five  per  cent. 

The  inheritance  tax  is  supplemented  by  an  annual  mort- 
main tax  on  corporations,  amounting  to  six-tenths  of  one 
per  cent  in  the  case  of  charitable  institutions  under  state 
inspection,  and  four  and  eight-tenths  per  cent  in  all  other 
cases. 

The  inheritance  tax  amounted  in  1904-5  to  39,483,350 
lire :  the  mortmain  tax  to  5,708,836  lire. 


52  THE  INHERITANCE  TAX  [222 

IV.  Russia 
The  Russian  government  followed  the  example  of  the 
other  European  countries  by  introducing  a  tax  on  inherit- 
ances and  gifts  in  1882.^     The  rates  were  increased  one- 
half  in  1905,  and  are  now  as  follows: 

Per  cent. 
Husband   or   wife,   direct   descendants   and   ancestors,   adopted 

children,  sons-in-law  and  daughters-in-law lYt 

Step-children,  and  brothers  and  sisters  and  their  orphan  children.     6 

Other  relatives  of  the  third  and  fourth  degrees 9 

Other  persons 12 

No  tax  is  required  on  amounts  of  1,000  rubles  or  less, 
on  bequests  to  benevolent,  religious,  or  educational  in- 
stitutions, on  the  peasant  allotments,  on  peasants'  mov- 
ables from  which  no  income  is  derived,  or  on  the  rural 
estates  of  the  noble  class  when  passing  to  direct  heirs. 
A  usufructuary  pays  the  tax  on  one-half  the  value 
of  the  property.  Declarations  stating  the  value  of  the 
property  transferred  are  required  to  be  made  by  the 
heirs  or  executors,  and  may  be  reviewed  by  the  courts. 
Deductions  are  made  for  debts  and  funeral  expenses. 
If  the  tax  is  not  paid  within  one  month  after  the  amount 
due  is  ascertained,  a  penalty  of  one  per  cent  per  month 
is  added ;  but  by  applying  for  an  extension  of  time  and 
paying  six  per  cent  interest,  the  heir  may  postpone  the 
payment  of  the  tax  on  movables  for  one  year,  and  pay  the 
tax  on  landed  property  in  three  annual  instalments.  The 
tax  applies  to  all  property  situated  in  Russia,  except  when 
the  decedent  is  a  subject  of  a  foreign  state  which  does  not 
tax  the  property  of  Russian  subjects  in  like  cases.  Al- 
though the  tax  is  made  applicable  to  all  gratuitous  transfers 
of  which  there  is  documentary  evidence,  it  has  sometimes 

^  Finans-Archiv,  v,  1096;  Kriiger,  Die  Erbschaftssteuer,  p.  30. 


223]  SCANDINAVIAN  COUNTRIES  53 

been  evaded  by  death-bed  gifts/    Before  the  recent  increase 

in  rates  the  proceeds  were  about  4,000,000  rubles  a  year. 

A  project  for  a  progressive  inheritance  tax  has  recently 

been  elaborated  and  brought  forward  by  the  Minister  of 

Finance. 

V.  Scandinavian  Countries 

A  collateral-inheritance  tax  was  imposed  in  Denmark  in 
1792,  for  the  purpose  of  reducing  the  public  debt.  The 
preamble  of  the  law  set  forth  that  this  was  the  least  burden- 
some of  taxes,  because  paid  out  of  new  acquisitions  of  prop- 
erty received  accidentally  and  often  unexpectedly.  The 
rate  was  four  per  cent.  In  18 10  this  tax  was  supplemented 
by  another  of  one-half  of  one  per  cent,  payable  by  all  heirs, 
direct  and  collateral.  The  amendment  and  consolidation 
of  these  two  laws  has  resulted  in  the  following  rates : 

Per  cent. 

Direct  heirs,  husband  or  wife i 

Brothers  and  sisters  and  their  children 4 

More  distant  relatives  and  strangers 7 

Where  an  estate  is  wound  up  by  a  probate  court  or  an  exe- 
cutor there  are  also  fees  to  be  paid  in  proportion  to  the 
amount  of  the  property. 

In  Norzvay,  by  the  law  of  1895,  direct  heirs  and  the  sur- 
viving husband  or  wife  are  exempt  from  inheritance  tax. 
Step-children  and  brothers  and  sisters  and  their  children 
pay  six  per  cent,  and  distant  collateral  relatives  eight  per 
cent.  The  exemption  of  small  amounts  is  made  conditional 
upon  the  general  economic  position  of  the  heir,  extending 
only  to  those  whose  entire  property,  including  the  inherit- 
ance, amounts  to  less  than  four  hundred  kroner. 

1  Mr.  Maurice  Jacobson,  formerly  a  student  in  Russia,  tells  me  of  a 
case  in  which  a  Russian  millionaire  evaded  the  tax  by  giving  away  his 
property  to  his  sons  a  few  hours  before  his  death. 


54  THE  INHERITANCE  TAX  [224 

The  Szvedish  Stamp-Tax  Act  of  1899  imposes  an  inherit- 
ance tax  at  progressive  rates,  although  the  maximum  is 
only  six  per  cent.  The  minimum  rate  for  relatives  of 
every  degree  is  one-half  of  one  per  cent;  but  for  the  sur- 
viving spouse  and  direct  descendants  the  maximum  is  only 
one  and  one-half  per  cent,  and  amounts  less  than  400  kroner 
are  exempt;  while  the  maximum  for  parents  and  brothers 
and  sisters  and  their  descendants  is  three  per  cent,  and  for 
more  distant  relatives  six  per  cent,  only  amounts  less  than 
200  kroner  being  exempt.  The  more  remote  the  relation- 
ship, also,  the  less  the  amount  required  to  subject  a  suc- 
cession to  the  maximum  rate.^ 

In  the  case  of  real  estate  passing  by  will,  there  is  an  ad- 
ditional registration  tax  of  six-tenths  of  one  per  cent.  Most 
of  the  towns  in  Sweden  levy  probate  duties  of  one  per  cent 
or  less  for  the  support  of  the  magistrates  and  other  public 
institutions. 

VI.  Other  European  Countries 
Belgium  has  a  rather  complicated  schedule  of  inheritance 
taxes.  As  in  the  Netherlands,  there  is  one  scale  for  the 
property  of  Belgian  decedents  and  another  for  real  estate  in 
Belgium  inherited  from  foreign  heirs.  In  the  former  case 
the  rates  are  as  follows : 

Per  cent. 

Direct  line,  on  real  estate  only 1.4 

Husband  or  wife 5-5 

Brothers  and  sisters 6.8 

Uncles  and  aunts,  nephews  and  nieces 8.2 

Others,  and  all  collateral  relatives  on  any  excess  above  the  in- 
testate portion 13.8 

In  the  case  of  real  estate  inherited  from  foreign  decedents 

^  These  complex  schedules  are  reproduced  in  the  Journal  of  the  Soci- 
ety of  Comparative  Legislation,  5 :  42,  43. 


225]  OTHER  COUNTRIES  55 

direct  heirs  pay  1.4  per  cent,  and  all  others  6.8  per  cent. 
A  usufruct  is  calculated  at  one-half  the  value  of  the 
property. 

In  Luxemburg  the  inheritance  tax  rises  to  ten  per  cent; 
and  as  in  the  Low  Countries  nearby,  in  the  case  of  bequests 
to  collateral  relatives  any  excess  over  the  intestate  portion 
is  taxed  at  the  maximum  rate.  Usufructuaries  pay  one- 
half  the  regular  rates. 

The  Spanish  inheritance  tax  of  1900  ranges  from  1.4 
per  cent  for  direct  heirs  and  5.6  per  cent  for  nephews  to 
12.6  per  cent  for  collateral  relatives  beyond  the  sixth  degree. 

Portugal  has  an  inheritance  tax  ranging  nominally  from 
five  to  fifteen  per  cent;  but  with  the  addition  of  a  supple- 
mentary tax  of  five  per  cent,  levied  since  1898,  and  a  stamp 
duty  of  two  per  cent,  the  actual  rates  are  as  follows : 

Per  cent. 

Parents  and  grandparents 5-355 

Husband  or  wife 8.032 

Brothers  and  sisters 10.710 

Distant  relatives  and  strangers 16.065 

By  reason  of  certain  peculiarities  of  valuation  the  tax  is 
really  heavier  in  many  cases  than  the  above  rates  would  in- 
dicate. Foros,  a  very  common  form  of  perpetual  ground 
rents  usually  payable  in  kind,  must  be  valued  at  not  less 
than  twenty  years'  purchase,  although  their  market  value  is 
usually  less.  Foros  dating  from  before  1867  generally  have 
a  clause  providing  that  when  the  tenant's  right  is  sold  the 
ground  landlord  shall  receive  from  two  and  one-half  to  ten 
per  cent  of  the  purchase  price,  and  the  estimated  amount  of 
one  such  laudemio  is  included  in  the  valuation  of  the  foro 
for  the  inheritance  tax.  These  provisions,  together  with 
high  assessments,  are  said  to  double  the  tax  in  some  cases.* 

1  Journal  of  the  Society  of  Comparative  Legislation,  5 :  39. 


56  THE  INHERITANCE  TAX  [226 

Greece  has  an  inheritance  tax  of  two  per  cent  for  brothers 
and  sisters,  three  per  cent  for  nephews  and  nieces,  and  five 
per  cent  for  more  distant  relatives  and  strangers  in  blood, 
including  adopted  children.     Small  amounts  are  exempt. 

Roumania,  by  a  law  of  1886,  taxed  collateral  relatives 
from  three  to  nine  per  cent,  exempting  the  husband  or  wife 
and  direct  heirs,  as  well  as  legacies  and  gifts  to  certain  pub- 
lic institutions.  In  1900,  as  one  of  the  results  of  the  finan- 
cial crisis  of  the  previous  year,  the  tax  was  extended  to 
heirs  of  every  class  and  the  rates  (on  real  estate)  were  fixed 
as  follows: 

Per  cent. 

Lineal  descendants i 

Husband  or  wife,  lineal  ancestors 3 

Brothers  and  sisters,  and  their  descendants 4 

Collateral  relatives  up  to  the  fourth  degree 6 

Collateral  relatives  from  the  fourth  to  the  twelfth  degree 9.2 

Strangers  in  blood 12 

Charitable  institutions 2 

In  the  case  of  movable  property,  which  is  not  reached  by 
any  other  part  of  the  Roumanian  tax  system,  the  inheritance 
tax  is  three  per  cent  higher  than  on  realty.^ 

Bulgaria  has  an  inheritance  tax  ranging  from  one-half 
of  one  per  cent  for  direct  heirs  to  ten  per  cent  for  those  be- 
yond the  sixth  degree  of  relationship. 

In  Monaco  the  rates  for  succession  to  landed  property 
range  from  one  to  six  per  cent ;  for  movables  the  rates  are 
only  one-half  as  high.  Successions  in  the  direct  line  are 
exempt  only  when  not  determined  by  will  or  deed.  No 
provision  is  made  for  the  deduction  of  debts.^ 

^  Creanga,  "  Die  Finanzpolitik  Rumaniens  in  ihrer  neuesten  Gestal- 
tung  und  die  fiir  die  Sanierung  der  Finanzkrisis  getroffenen  Mass- 
nahmen,"  in  Finans-Archiv,  20:  i,  7. 

*  Journal  of  the  Royal  Statistical  Society,  52 :  137. 


22/]  SOUTH  AMERICA  c» 

VII.  Spanish  America 

Uruguay  has  had  an  inheritance  tax  since  1857,  applying 
to  collateral  relatives  and  the  surviving  husband  or  wife, 
and  discriminating  against  intestacy  and  against  inherit- 
ances going  out  of  the  country.  The  rates  where  there  is 
a  will  are  from  four  to  six  per  cent,  and  in  cases  of  intes- 
tacy from  six  to  ten  per  cent,  according  to  relationship, 
with  three  per  cent  additional  when  property  goes  out  of 
the  country.  Even  direct  inheritances  passing  out  of  the 
country  are  taxed,  and  the  rate  in  this  case  is  eleven  per  cent. 

Chile.  In  order  to  avoid  repeated  payments  of  the  in- 
heritance tax  resulting  from  frequent  transfers  of  the  same 
property,  the  Chilean  law  of  1878  provides  that  the  tax 
shall  be  remitted  in  the  case  of  property  which  during  a 
period  of  ten  years  has  changed  hands  twice  through  death, 
and  on  which  the  tax  has  been  once  paid.  Amounts  not 
exceeding  2,000  pesos  in  value  are  always  exempt;  and  ex- 
emptions are  also  made  in  favor  of  the  municipalities,  free 
educational  institutions,  religious  organizations,  and  insti- 
tutions maintained  or  subsidized  by  the  government.  The 
rates  vary  from  one  per  cent  for  direct  descendants  to  eight 
per  cent  for  strangers  in  blood.  Portions  reserved  in  favor 
of  the  surviving  husband  or  wife  are  subject  to  a  tax  of  one 
per  cent;  other  successions  between  husband  and  wife  are 
taxed  three  per  cent. 

Brazil.  The  law  of  1898  imposes  an  inheritance  tax  of 
one-half  of  one  per  cent  for  the  direct  line,  five  and  one- 
half  per  cent  for  the  surviving  spouse  and  the  nearest  col- 
lateral relatives,  from  eleven  to  sixteen  and  one-half  per 
cent  for  more  distant  relatives,  and  twenty-two  per  cent 
for  strangers  in  blood.  Property  passing  to  any  member 
of  a  religious  order  pays  sixteen  and  one-half  per  cent, 
whatever  the  degree  of  relationship.     The  same  rate  is  ap- 


58  THE  INHERITANCE  TAX  [228 

plied  to  the  surviving  husband  or  wife  in  case  of  intestate 
succession. 

Argentina  has  a  collateral-inheritance  tax  of  five  and  ten 
per  cent,  imposed  by  the  public  education  act  of  1884  for 
the  benefit  of  the  schools.  There  are  also  stamp  duties 
incidental  to  the  settlement  of  estates. 

Guatemala.  The  Fiscal  Code  of  1881  provides  for  a  tax 
on  successions  and  gifts,  to  be  levied  at  the  follovi^ing  rates: 

Per  cent. 

Legitimate  descendants I 

Lineal  ancestors,  and  acknowledged  natural  children 2 

Husband  or  wife,  brothers  and  sisters,  and  adopted  children...  3 

Other  collateral  relatives,  and  the  adopted  father 5 

Relations  by  marriage 8 

Strangers 10 

Exemptions  are  made  in  favor  of  successions  not  exceed- 
ing 1,000  pesos,  and  bequests  to  municipalities  and  to  in- 
stitutions subsidized  by  the  state. 

Mexico.  Each  of  the  states  of  Mexico  has  its  own  in- 
heritance tax,  and  in  addition  there  is  a  national  stamp  tax 
of  one  per  cent  for  direct  heirs  and  the  surviving  spouse, 
two  per  cent  for  collateral  heirs,  and  three  per  cent  for  very 
distant  relatives  and  strangers.^  There  is  also  in  the  Fed- 
eral District  and  in  the  Territories  an  inheritance  tax  levied 
at  the  following  rates :  ^ 

For  the  first  Excess  above 

10,000  pesos.  10,000  pesos. 

Per  cent.  Per  cent. 

Descendants,  husband  or  wife H  i 

Ascendants i  2 

Relatives  of  the  second  to  fourth  degrees  in- 
clusive       3  4 

Relatives  of  the  fifth  to   eighth  degrees  in- 
clusive      8  8 

More  distant  relatives  and  strangers 12  12 

1  Law  of  April  25,  1893.  ^  Lg^v  of  June  7,  1901. 


229]  JAPAN  59 

VIII.  Japan 
In  1905  Japan  adopted  an  inheritance  tax  which  is  not 
only  progressive  and  graduated  according  to  relationship, 
but  is  also  somewhat  higher  for  succession  to  individual 
property  than  for  succession  to  the  headship  of  a  house. 
Amounts  less  than  five  hundred  yen  in  the  first  case  or 
1,000  yen  in  the  second  case  are  exempt.  The  rates  begin 
at  1.2  per  cent,  and  increase  gradually  until  for  amounts 
between  70,000  and  100,000  yen  they  range  from  four  to 
six  and  one-half  per  cent.  Beyond  that  point  the  rate  in- 
creases one-half  of  one  per  cent  for  each  additional  50,000 
yen,  up  to  1,000,000  yen,  at  which  point  the  progression 
ceases.  The  tax  is  not  imposed  on  successions  which  occur 
through  death  in  battle,  or  through  death  resulting  within 
one  year  from  wounds  received  or  sickness  suffered  in  war. 
Gifts  and  legacies  to  public  corporations  and  charitable  en- 
terprises are  exempt. 


CHAPTER  VI 
THE  BRITISH  EMPIRE 
I.  The  United  Kingdom 

"  There  is  no  art  which  one  government  sooner  learns 
of  another,"  said  Adam  Smith,  "  than  that  of  draining 
money  from  the  pockets  of  the  people."  England  having 
borrowed  from  Holland  the  idea  of  stamp  taxes,  the  original 
Stamp  Act  of  1694  ^  contained  a  provision  for  a  uniform 
tax  of  five  shillings  on  probates  and  letters  of  administration 
in  the  case  of  estates  of  more  than  twenty  pounds.  Four 
years  later,^  at  the  expiration  of  the  term  for  which  the 
stamp  duties  were  originally  granted,  this  tax  was  doubled ; 
and  in  1779  '  it  was  graduated  from  ten  to  fifty  shillings, 
according  to  the  value  of  the  estate. 

The  publication  of  The  Wealth  of  Nations  had  by  this  time 
made  the  Dutch  inheritance  taxes  better  known,  and  the  re- 
sult was  an  extension  of  that  mode  of  taxation  in  England. 
In  1780*  Lord  North  introduced  a  tax  on  receipts  for 
legacies  and  distributive  shares  of  personal  property,  gradu- 
ated from  two  shillings  six  pence  for  amounts  not  ex- 
ceeding twenty  pounds  to  twenty  shillings  for  amounts  of 
one  hundred  pounds  or  more.     A  few  years  later  ^  the  rates 

1  5  and  6  Will,  and  Mary,  chap.  21. 

29  and  10  Will.  Ill,  chap.  25. 

8  19  Geo.  Ill,  chap.  66.  *  20  Geo.  Ill,  chap.  28. 

"5  23  Geo.  Ill,  chap.  58;  29  Geo.  Ill,  chap.  5. 

60  [230 


231]  THE  BRITISH  EMPIRE  6 1 

were  increased,  and  something  approximating  a  propor- 
tional scale  introduced;  and  discriminations  were  made  in 
favor  of  the  widow,  children,  and  grandchildren.  But  this 
tax,  naturally  enough,  was  evaded  by  omitting  to  make  use 
of  receipts,  until  in  1796  ^  Pitt  made  it  a  tax  on  the  transfer 
itself  and  made  executors  and  administrators  liable  for  its 
payment.  The  receipts  were  still  stamped  to  show  the  pay- 
ment of  the  duty,  but  the  giving  and  taking  of  receipts  was 
now  made  compulsory.  At  the  same  time  the  tax  was 
graduated  according  to  relationship  from  two  per  cent  for 
brothers  and  sisters  to  six  per  cent  for  distant  relatives. 
Pitt  proposed  a  corresponding  tax  on  succession  to  real  es- 
tate ;  but  this  met  with  powerful  opposition,  and  it  was  left 
for  Gladstone  to  carry  through  the  reform  in  1853.^ 

The  English  tax  on  probates  and  letters  of  administration 
was  extended  to  Scotland  in  1804  under  the  name  of  in- 
ventory duty.  A  probate  tax  had  also  been  imposed  by 
the  Irish  parliament  in  1774,  but  until  1842  it  was  lower 
in  Ireland  than  in  Great  Britain ;  in  that  year  all  parts  of  the 
United  Kingdom  were  placed  on  an  equal  footing. 

The  account  duty  was  imposed  in  188 1  ^  merely  to  pro- 
tect the  probate  duty  from  evasion  by  gifts  causa  mortis, 
joint  investments,  etc.  It  was  levied  at  the  same  rates  as 
the  probate  duty  on  all  gifts  of  personal  property  unless 
made  in  good  faith  twelve  months  before  the  death  of  the 
donor.  The  probate  duty  was  now  made  slightly  progres- 
sive, with  a  maximum  rate  of  three  pounds  for  every  hun- 
dred pounds  or  fraction  thereof. 

The  estate  duty,  as  originally  introduced  by  Mr.  Goschen 
in  1889,*  was  an  additional  tax  of  one  per  cent  on  personal 

1  26  Geo.  Ill,  chap.  52.  2  16  and  17  Vict.,  chap.  51. 

8  44  Vict.,  chap.  12.  *  44  Vict.,  chap.  12. 


62  THE  INHERITANCE  TAX  [232 

estates  exceeding  ten  thousand  pounds,  and  on  individual 
successions  of  realty  exceeding  ten  thousand  pounds  in 
value;  so  that  it  enhanced  the  progressive  effect  of  the 
probate  duty.  This  completed  the  complicated  system  of 
taxes  knovv^n  collectively  as  the  "  death  duties,"  a  name  said 
to  have  been  given  them  by  Gladstone.^ 

Besides  being  needlessly  complicated,  the  system  was  full 
of  anomalies  and  inequalities.  The  probate  and  account 
duties  applied  only  to  personal  property ;  the  succession  duty 
on  real  estate  had  been  increased  ^  to  rates  nominally  higher 
than  those  of  the  legacy  duty,  with  a  view  to  equalizing  the 
burdens  on  real  and  personal  property,  but  the  exemptions 
from  estate  duty  introduced  a  further  inequality,  and  in  the 
mode  of  valuation  and  the  time  allowed  for  payment  real 
estate  was  always  favored.  While  the  duties  on  personalty 
were  always  paid  in  a  lump  sum  and  on  the  full  capital  value, 
those  on  realty  were  paid  in  instalments  extending  over  sev- 
eral years,  and  on  fictitious  valuations  calculated  from  the 
annual  value.  In  the  case  of  unproductive  land  held  for 
speculative  purposes  there  was  absolutely  no  tax.* 

In  the  Finance  Act  of  1894*  Sir  Vernon  Harcourt  sim- 
plified the  system  of  death  duties,  removed  the  more  glar- 
ing anomalies,  and  greatly  extended  the  application  of  the 
progressive  principle.  For  the  old  probate,  account,  and 
estate  duties  he  substituted  a  new  estate  duty  graduated 
according  to  the  size  of  the  estate,  real  and  personal,  from 
one  to  eight  per  cent,  as  follows: 

1  Wilson,  The  National  Budget,  p.  117. 

2  51  Vict.,  chap.  8,  pt.  iv. 

8  For  a  fuller  statement  of  these  anomalies  see  Buxton  and  Barnes' 
Handbook  to  the  Death  Duties  (1890),  part  ii. 
<  57  and  58  Vict.,  chap.  30. 


233] 


THE  BRITISH  EMPIRE 


63 


When  the  principal  value  of  the  estate — 

Exceeds    £100  and  does  not  exceed  £300 30  shillings. 


300 

500 

1,000 

10,000 

25,000 

50,000 

75,000 

100,000 

150,000 

250,000 

500,000 


500 50  " 

1,000 2  per  cent. 

10,000 3  " 

25,000 4  " 

50.000 4^  " 

75,000 5 

100,000 sy^  " 

150,000 6  " 

250,000 6j^  " 

500,000 7  " 

1,000,000 7^  " 


1,000,000 8        " 

By  the  Finance  Act  of  1907  the  estate  duty  on  estates 
exceeding  £150,000  was  increased  to  the  following  scale: 

When  the  principal  value  of  the  estate — 

Exceeds  ;£iso,ooo  and  does  not  exceed  ;^250,ooo 7  per  cent. 


250,000 

500,000    " 

"      750,000 

750,000    " 

"     1,000,000. 

1,000,000    " 

"     1,500,000 

1,500,000   " 

"     3,000,000 

2,000,000   " 

"     2,500,000 

2,500,000   " 

"     3,000,000 

3,000,000  

10  per  cent  on  the 

firit  ;£l,000,000. 


11  percent 

12  per  cent 

13  per  cent 

14  per  cent 

15  per  cent 


On  the  re- 
mainder. 


In  addition  to  this  estate  duty  calculated  on  the  value  of 
the  estate  as  a  whole,  collateral  heirs  still  have  to  pay 
legacy  duty  on  their  legacies  or  distributive  shares  of  per- 
sonal property,  and  succession  duty  on  the  corresponding 
shares  of  real  estate  and  on  leaseholds,  settled  personalty, 
and  legacies  charged  on  land,  which  are  not  subject  to 
legacy  duty,  according  to  the  following  consanguinity  scale : 

Per  cent. 

Brothers  and  sisters  and  their  descendants 3 

Uncles  and  aunts  and  their  descendants 5 

Great-uncles  and  great-aunts  and  their  descendants 6 

Other  persons lo 


64  THE  INHERITANCE  TAX  [234 

Thus  the  combined  effect  of  the  death  duties  is  that  any 
portion  of  an  estate  of  more  than  £3,000,000  passing  to  a 
very  distant  relative  or  by  will  to  a  stranger  in  blood  will 
pay  about  23  per  cent  (legacy  and  succession  duties  being 
payable  only  on  what  remains  after  the  estate  duty  is  paid.) 

In  the  case  of  a  settlement  there  is  an  additional  "  set- 
tlement estate  duty "  of  one  per  cent,  compensating  to 
some  extent  for  the  provision  that  estate  duty  is  payable 
only  once  while  the  settlement  continues.  The  surviving 
husband  or  wife  is  exempt  from  settlement  estate  duty,  as 
well  as  from  legacy  and  succession  duty. 

Estates  not  exceeding  one  thousand  pounds  in  value  and 
specific  legacies  of  less  than  twenty  pounds  value  are  exempt 
from  legacy  and  succession  duty;  and  estates  of  less  than 
one  hundred  pounds  are  exempt  from  estate  duty  also.  The 
exemptions  from  estate  duty  include  also  a  single  annuity 
of  twenty-five  pounds  or  less,  the  property  of  common  sea- 
men, marines,  or  soldiers  dying  in  the  service,  pensions  pay- 
able by  the  Indian  government  to  the  widow  or  children  of 
deceased  officers,  and  pictures,  books,  etc.,  of  scientific  or 
historic  interest  given  for  public  purposes,  or  to  a  university. 

Both  real  and  personal  property  is  now  assessed  at  its 
market  value ;  "  provided  that,  in  the  case  of  any  agricul- 
tural property,  where  no  part  of  the  principal  value  is  due 
to  the  expectation  of  an  increased  income  from  such  prop- 
erty, the  principal*  value  shall  not  exceed  twenty-five  times 
the  annual  value  as  assessed  under  Schedule  A  of  the  In- 
come Tax  Acts,"  making  a  deduction  not  exceeding  five  per 
cent  of  such  annual  value  for  expenses  of  management.  In 
determining  the  value  of  the  estate,  reasonable  funeral  ex- 
penses and  other  debts  payable  to  residents  of  the  United 
Kingdom  are  deducted.  The  death  duties  on  real  estate 
may  still  be  paid  in  instalments  extending  over  eight  years, 


235]  ^^^  BRITISH  EMPIRE  55 

but  interest  is  charged  on  the  deferred  payments,  and  estate 
duty  on  annuities,  etc.,  may  also  now  be  paid  in  instalments.^ 

Apparently  in  order  to  avoid  excessive  differences  in  the 
tax  due  to  insignificant  differences  in  the  valuation  of  es- 
tates, estate  duty  is  now  payable  only  on  multiples  of  one 
hundred  pounds,  fractions  of  that  value  being  disregarded; 
and  the  duty  on  estates  exceeding  one  hundred  and  not  ex- 
ceeding two  hundred  pounds  has  been  fixed  at  one  pound.'' 

"  Whereas  certain  property,  by  reason  of  the  same  be- 
longing to  or  being  vested  in  bodies  corporate  or  unincor- 
porate,  escapes  liability  to  probate,  legacy,  or  succession 
duties,  and  it  is  expedient  to  impose  a  duty  thereon  by  way 
of  compensation  to  the  revenue,"  an  act  of  1885  ^  established 
a  tax  of  five  per  cent  on  the  annual  value,  income,  or  profits 
of  the  property  of  corporations,  societies,  etc.,  after  deduct- 
ing all  necessary  outgoings.  But  this  corporation  tax  does 
not  apply  to  property  devoted  to  public,  religious,  or  chari- 
table purposes,  or  to  the  promotion  of  education,  litera- 
ture, science,  or  the  fine  arts;  to  the  property  of  friendly 
societies  or  savings  banks;  to  the  property  of  corporations 
established  for  trade  or  business,  or  whose  capital  stock  is 
so  held  as  to  be  liable  to  death  duties;  nor  to  property  ac- 
quired with  funds  voluntarily  contributed  within  thirty 
years,  or  acquired  within  thirty  years  where  legacy  duty  or 
succession  duty  was  paid  on  the  acquisition  thereof. 

Since  1888  *  half  of  the  proceeds  of  the  probate  and  ac- 
count duties  has  been  transferred  to  the  local  taxation  ac- 
count for  the  relief  of  local  rates ;  and  an  equivalent  amount 
of  the  estate-duty  receipts  is  similarly  treated.  The  total 
receipts  from  death  duties  in  recent  fiscal  years  were  as 
follows : 

1  59  and  60  Vict.,  chap.  28,  §  16.  -  Ibid.,   §  17. 

3  48  and  49  Vict.,  chap.  51,  pt.  2.    *  51  and  52  Vict.,  chap.  41,  §  21. 


66 


THE  INHERITANCE  TAX 


[236 


Estate  duty ' 

Probate  (and  inventory)  duty 
and  account  duty " 

Temporary  estate  duty  ^ 

Legacy  duty 

Succession  duty 

Corporation  duty 

Total 


1902-03. 


13,820,404 

69,360 

12,099 

3.001,793 

965.673 

43.848 


17.913.177 


1903-04. 

1904-05. 

£ 

£ 

13.531.391 

13,272,562 

67,980 

63.796 

15.972 

8,365 

2,966,960 

3,144,999 

698,184 

724.499 

45,650 

44,210 

17.326,137 

17,258,431 

1905-06. 

£ 
13,524,647 

81,404 
10,117 

3,006,562 

673.851 

48,344 

17.344.925 


*  Including  settlement  estate  duty. 

*  Payable  only  on  property  passing  by  deaths  occurring  prior  to  August  a,  1894. 

II.  Australasia 
In  the  Australasian  colonies  succession  duties  are  among 
the  chief  sources  of  revenue ;  and  in  some  cases  heavy  pro- 
gressive taxes  have  been  imposed  not  from  fiscal  consider- 
ations alone,  but  also  for  the  purpose  of  breaking  up  large 
estates.  The  rates  are  progressive  in  all  the  colonies,  ris- 
ing to  ten  per  cent  in  Victoria,  New  South  Wales,  South 
A^ustralia,  and  Western  Australia,  to  thirteen  per  cent  in 
New  Zealand,  and  to  twenty  per  cent  in  Queensland.  Sir 
Charles  Dilke  tells  us  ^  that  the  institution  of  private  prop- 
erty has  not  been  weakened,  nor  capital  driven  from  the 
colonies,  by  these  progressive  taxes.  They  have  given  very 
general  satisfaction,  and  in  almost  every  instance  the  rates 
have  been  increased  after  the  tax  has  been  in  operation  for 
a  time. 


•  Problems  of  Greater  Britain,  pt.  vi,  chap.  i. 


237]  ^^^  BRITISH  EMPIRE  5- 

The  graduation  according  to  relationship  is  much  less 
elaborate  than  in  European  countries ;  usually  not  more  than 
two  or  three  classes  of  relatives  are  distinguished.  None 
of  the  laws  exempt  direct  heirs;  they  are  usually  taxed  at 
one-half  the  rates  which  apply  to  more  distant  relatives. 

The  parliament  of  Victoria  first  imposed  "  duties  on  the 
estates  of  deceased  persons  "  in  1870/  in  order  to  meet  the 
financial  needs  of  the  time.  The  rates  varied  from  one  per 
cent  for  estates  of  £1,000  and  less  to  five  per  cent  for  estates 
of  more  than  £20,000.  In  1876^  the  large  estates  were 
made  subject  to  further  progression,  with  a  maximum  of 
ten  per  cent  for  estates  of  more  than  £100,000;  and  in 
October,  1892,^  a  new  and  very  elaborate  schedule  was 
adopted,  leaving  the  percentages  approximately  the  same  as 
before,  but  dividing  taxable  estates  according  to  size  into 
thirty-seven  classes  instead  of  nine.  For  estates  exceeding 
£1,000  and  not  exceeding  £5,000  the  rate  is  two  per  cent, 
and  those  between  £5,000  and  £6,000  are  taxed  three  per 
cent;  from  this  point  the  rate  is  increased  by  increments  of 
one-fifth  of  one  per  cent  until  it  reaches  ten  per  cent  in  the 
case  of  all  estates  of  more  than  £100,000.  But  the  dece- 
dent's widow,  children,  and  grandchildren  pay  only  one- 
half  these  rates  when  the  estate  does  not  exceed  £50,000; 
the  act  of  1892  removed  the  discrimination  in  their  favor  in 
the  case  of  all  larger  estates.  There  is  no  exemption  in 
favor  of  bequests  for  charitable  or  educational  purposes. 

An  amendment  passed  in  1889  *  exempts  estates  of  £1.000 
and  less,  and  also  provides  that  £1,000  shall  be  deducted  from 
the  value  of  all  estates  of  less  than  £5,000,  but  in  all  other 

1  34  Vict.,  no.  388.  2  3Q  Vict.,  no.  523. 

8  56  Vict.,  no.  1261. 

*  53  Vict.,  no.  1053 ;  54  Vict.,  no.  1060,  §  100. 


68  THE  INHERITANCE  TAX  [238 

cases  duty  is  payable  on  the  full  amount.  This  provision, 
together  with  the  application  of  the  percentage  for  each 
class  to  the  whole  amount,  instead  of  only  to  the  excess 
above  the  next  lower  class,  results  in  a  strange  irregularity 
in  the  progression — an  irregularity  which  is  to  be  found 
in  many  other  progressive  tax  schedules,  but  which  is  none 
the  less  anomalous  on  that  account.  For  example,  an  es- 
tate valued  at  £4,990  would  pay  two  per  cent  on  £3,990,  or 
£79  i6s;  while  an  estate  valued  at  £5,010  would  pay  three 
per  cent  on  £5,010,  or  £150  6s.  In  other  words,  a  differ- 
ence of  twenty  pounds  in  the  valuation  of  the  estate  would 
make  a  difference  of  more  than  seventy  pounds  in  the 
amount  of  the  duty,  leaving  the  heir  fifty  pounds  poorer 
than  he  would  be  if  the  estate  had  been  twenty  pounds  less. 
In  theory,  the  rate  does  not  jump  at  once  from  the  slightly 
less  than  one  and  three-fifths  per  cent  of  the  first  case  to 
the  three  per  cent  of  the  second,  for  by  the  words  of  the 
act  an  estate  valued  at  just  £5,000  would  pay  two  per  cent 
on  the  full  amount;  yet  there  is  at  this  point  a  temptation 
to  undervaluation  which  in  the  case  of  ordinary  mortals 
must  be  almost  irresistible.  Attention  was  called  to  the 
anomaly  when  the  bill  was  before  the  Legislative  Council.^ 
The  object  of  the  amendment  was  simply  to  give  relief  to 
small  estates,  which  had  formerly  paid  duties  amounting  in 
some  cases  to  such  sums  as  one  shilling,  and  even  one 
penny ; "  and  in  the  form  in  which  it  was  finally  passed  it 
was  the  result  of  a  compromise.  The  Government  had 
proposed  an  exemption  of  £500,  a  like  amount  to  be  deducted 
from  all  estates;  but  the  exemption  was  raised  to  £1,000 
in  the  Assembly,  and  it  was  largely  to  counterbalance  the 
consequent  loss  of  revenue  that  the  deduction  was  made 

1  Parliamentary  Debates,  1889,  p.  2059.  2  Jiji^^  ^   1654. 


239"]  ^^^  BRITISH  EMPIRE  ^ 

inapplicable  to  the  larger  estates/  This  result  might  have 
been  accomplished  much  more  equitably,  and  with  fewer 
words,  by  simply  increasing  the  percentages  for  all  classes 
in  the  schedule  except  the  first,  letting  the  deduction  ap- 
ply to  all  estates. 

Every  executor  or  administrator  of  a  dutiable  estate  is 
required  by  law  to  file  in  the  office  of  the  Master-in-Equity 
of  the  Supreme  Court  an  itemized  account  of  the  decedent's 
property  and  debts.  The  penalty  prescribed  for  false  state- 
ment is  imprisonment  for  from  one  to  three  years,  and  a 
fine  not  to  exceed  a  hundred  pounds.  In  case  the  Master 
is  dissatisfied  with  the  valuation,  he  may  appoint  a  valuator 
to  fix  the  value  of  the  property,  and  may  then  agree  with 
the  personal  representative  as  to  the  final  valuation,  or  may 
compel  the  attendance  of  witnesses  and  take  evidence  under 
oath  as  to  the  value  of  the  estate.  If  the  personal  repre- 
sentative is  dissatisfied  with  the  final  valuation  of  the  Mas- 
ter-in-Equity he  may  appeal  to  the  Supreme  Court.  The 
duty  must  be  paid  before  the  issue  of  probate  or  letters  of 
administration.  It  is  deemed  a  debt  of  the  decedent  to  the 
Crown,  and  is  to  be  paid  out  of  the  personal  estate,  after 
the  payment  of  testamentary  and  funeral  expenses,  in  prior- 
ity to  all  other  debts.  If  the  personal  property  is  insuffi- 
cient, real  estate  is  to  be  used  to  satisfy  the  duty.  A  donatio 
causa  mortis,  or  any  conveyance  made  to  take  effect  upon 
the  death  of  the  grantor,  or  with  intent  to  evade  the  duty, 
is  taxed  as  a  part  of  the  grantor's  estate  at  his  death.  Settle- 
ments containing  trusts  or  dispositions  to  take  effect  after 
the  settler's  death  are  also  taxable;  and  settlements  and 
deeds  of  gift  are  further  liable  to  a  progressive  stamp  tax 
with  a  maximum  rate  of  two  and  one-half  per  cent.^ 

1  Parliamentary  Debates,  1889,  p.  1657.  2  56  Vict.,  no.  1274. 


yo  THE  INHERITANCE  TAX  [240 

The  New  South  Wales  Stamp  Duties  Act  of  1880  ^  im- 
posed a  one  per  cent  probate  duty,  which  was  replaced  six 
years  later  ^  by  a  progressive  tax  of  from  one  to  five  per 
cent.  Very  small  estates  were  exempted  by  a  provision 
which  required  probate  or  letters  of  administration  only  on 
estates  exceeding  two  hundred  pounds. 

At  the  end  of  1899^  New  South  Wales  adopted  outright 
the  scale  of  duties  in  force  in  Victoria,  but  without  any 
deduction  from  the  value  of  estates  of  from  £1,000  to 
£5,000.  By  an  amendment  of  1904  *  the  widow,  children, 
and  grandchildren  are  granted  half  rates  only  when  the  es- 
tate does  not  exceed  £30,000. 

Queensland,  as  long  ago  as  1866,"'  had  a  stamp  duty  on 
probates  of  wills  and  letters  of  administration,  approximat- 
ing one  per  cent  where  there  was  a  will  and  one  and  one- 
half  per  cent  in  cases  of  intestacy.  This  duty  was  replaced 
in  1886  ®  by  a  progressive  succession  tax  ranging  from  two 
per  cent  on  estates  between  one  hundred  and  one  thousand 
pounds  in  value  to  five  per  cent  on  estates  of  more  than 
£20,000,  with  half  rates  for  the  widow  and  children. 

By  the  act  of  October  4th,  1892,^  the  succession  duty 
varies  from  one  per  cent  on  small  estates  passing  to  direct 
heirs  to  twenty  per  cent  on  such  portions  of  large  estates  as 
are  bequeathed  to  others  than  relatives  of  the  deceased.  The 
rates  in  detail  are  shown  in  the  following  table: 

^  44  Vict.,  no.  3.  2  50  Vict.,  no.  10. 

3  Act  no.  45.  *  Act  no.  24,  §  24. 

"  30  Vict.,  no.  14.  «  SO  Vict.,  no.  12. 

'  56  Vict.,  no.  i^,  amended  by  4  Edw.  VII,  no.  17. 


241  ]  THE  BRITISH  EMPIRE  7I 

Where  the  estate  amounts  to —  „ 

Per  cent. 

£200  and  less  than  ii.ooo 2 

1,000         "         "  2,500 3 

2,500         "         "  5,000 4 

5,000         "         "         10,000 6 

10,000        "        "        20,000 8 

20,000  or  more 10 

For  the  wife,  husband,  or  lineal  issue,  one-half  the  above  rates;  for 

strangers  in  blood,  double  the  above  rates. 

Where  the  husband  or  wife  of  the  successor  would  be 
chargeable  with  a  lower  rate  than  the  successor,  the  lower 
rate  applies.  Estates  of  less  than  two  hundred  pounds  and 
single  successions  of  less  than  twenty  pounds  are  exempt. 
It  is  expressly  provided  that  trusts  for  charitable  or  public 
purposes  are  chargeable  at  the  rates  which  apply  to  stran- 
gers in  blood. 

Besides  the  succession  duty,  there  is  a  probate  duty  on 
all  estates  of  more  than  three  hundred  pounds  net  value,  at 
the  rate  of  one  pound  for  each  one  hundred  pounds  or  frac- 
tion thereof.  This  duty  must  be  paid  before  the  issue  of 
probate  or  letters  of  administration. 

The  succession  duty  on  personalty  is  payable  when  the 
heir  comes  into  possession  of  the  property ;  but  in  the  case  of 
real  estate  the  duty  is  payable  in  four  equal  semi-annual  in- 
stalments. The  duty  on  an  annuity  or  life  estate  is  esti- 
mated according  to  the  present  value  of  the  annuity,  and 
paid  in  four  annual  instalments ;  but  that  on  a  legacy  di- 
rected to  be  used  for  the  purchase  of  an  annuity  is  to  be 
paid  at  once.  Remaindermen  are  not  liable  to  duty  until 
they  come  into  possession  of  the  property;  but  if  they  de- 
sire, the  duty  may  be  commuted  and  paid  in  advance.  In 
the  case  of  plate,  furniture,  and  other  property  not  yielding 
income,  there  is  no  duty  on  any  interest  which  does  not 
carry  with  it  the  power  to  sell  the  property.     The  duty  re- 


72  THE  INHERITANCE  TAX  [242 

mains  a  first  charge  on  real  estate  for  six  years,  or  for  twelve 
years  if  no  notice  of  the  succession  is  given  or  first  instal- 
ment paid,  and  on  personalty  as  long  as  the  property  re- 
mains in  the  hands  of  the  successor.  When  a  successor  ap- 
plies to  be  registered  as  the  owner  of  land,  unless  he  pro- 
duces a  certificate  showing  that  the  duty  has  been  paid,  the 
Registrar  of  Titles  makes  an  entry  "  Succession  duty  not 
paid,"  which  remains  on  the  register  until  the  duty  is  paid 
or  ceases  to  become  a  charge  on  the  land.  The  act  pre- 
scribes a  penalty  of  five  per  cent  a  month  for  neglecting  to 
give  notice  of  a  succession  when  the  tax  becomes  payable, 
or  neglecting  to  pay  the  duty  within  twenty-one  days  after 
it  has  been  finally  assessed.  Any  person  guilty  of  false 
declaration  is  liable  to  fine  and  imprisonment. 

In  1876  South  Australia  adopted  a  scheme  of  probate  and 
succession  duties  based  on  the  English  model.  The  suc- 
cession duty  on  both  real  and  personal  property,  like  the 
English  legacy  and  succession  duty  of  that  day,  was  gradu- 
ated from  one  per  cent  for  direct  heirs  to  ten  per  cent  for 
the  most  distant  relatives  and  strangers  in  blood,  and  British 
practice  was  followed  also  in  valuing  the  interest  of  a  suc- 
cessor in  real  estate  at  the  capitalized  value  of  an  annuity 
equal  to  the  annual  value  of  the  property,  as  well  as  in 
several  less  important  provisions.  The  probate  duty  was 
not  so  close  a  copy  of  the  British  model;  the  rate  was  one 
per  cent  where  there  was  a  will,  and  one  and  one-half  per 
cent  in  cases  of  intestacy.  In  addition,  there  was  a  regres- 
sive probate  fee  ^  also  discriminating  against  intestacy.  It 
was  graduated  from  five  shillings  on  very  small  estates  to 
five  pounds  on  all  estates  of  more  than  £5,000,  where  there 
was  a  will ;  in  other  cases  it  was  increased  one-half. 

^  No.  537  of  1891. 


243]  '^^^  BRITISH  EMPIRE  73 

In  1893  a  rather  complex  progressive  schedule  was  sub- 
stituted for  the  proportional  duties  formerly  in  force.  Di- 
rect heirs  and  the  surviving  husband  or  wife  pay  from  one 
and  one-half  per  cent  on  amounts  between  five  hundred  and 
seven  hundred  pounds  to  ten  per  cent  on  amounts  of  £200,- 
000  and  upwards,  except  that  minor  children  and  widows 
are  favored  with  one-half  these  rates  when  the  net  value  of 
the  entire  estate  is  under  £2000.  The  rates  for  collateral 
relatives  are  nearly  the  same,  with  the  addition  of  a  one 
per  cent  rate  for  amounts  under  two  hundred  pounds,  ex- 
cept that  the  progression  is  much  more  rapid,  the  maximum 
rate  of  ten  per  cent,  for  example,  applying  to  all  amounts  of 
£20,000  or  more.  Strangers  in  blood  pay  ten  per  cent  in 
all  cases. 

Tasmania  has  for  many  years  had  a  slightly  progressive 
probate  tax  on  personalty  alone,  for  which  there  was  sub- 
stituted in  1904  ^  a  tax  on  both  real  and  personal  estates 
ranging  from  two  to  ten  per  cent  for  direct  heirs,  with 
double  rates  for  collateral  heirs  (except  that  the  maximum 
is  ten  per  cent),  and  a  uniform  ten  per  cent  rate  for  very 
distant  relatives  and  strangers  in  blood. 

In  Western  Australia,  probate  duty  is  levied  at  the  rate 
of  one  per  cent  on  the  excess  above  £1500,  up  to  £2500; 
above  that  amount  duty  at  from  two  to  ten  per  cent  is  pay- 
able on  the  entire  estate.  Direct  heirs,  including  the  sur- 
viving husband  or  wife  and  step-children,  pay  half  these 
rates. 

The  New  Zealand  Deceased  Persons'  Estates  Duties  Act 
of  1881  ^  imposed  a  progressive  tax  according  to  the  fol- 
lowing schedule: 

1  4  Edw.  VII,  no.  9.  ^  1881,  no.  41- 


74  THE  INHERITANCE  TAX  [244 

On  estates  not  exceeding  £100,  no  duty. 
On  estates  exceeding  £100  and  not  exceeding  £1,000,  2  per 
cent. 

On  any  estate  not  exceeding  £5,000: 

2  per  cent  on  the  first  £1,000, 

3  per  cent  on  the  remainder. 

On  every  additional  £5,000  or  any  part  thereof  up  to  £20,000: 

4  per  cent  on  the  first  additional  £5,000  or  part  thereof, 

5  per  cent  on   the   second   additional   £5,000  or   part 
thereof, 

6  per  cent  on  the  third  additional  £5,000  or  part  thereof. 
On  every  additional  £10,000  or  any  part  therof  up  to  £50,000 : 

7  per  cent  on  the  first  additional  £10,000  or  part  thereof, 

8  per  cent  on  the  second  additional   £10,000  or  part 
thereof, 

9  per  cent  on  the  third  additional  £10,000  or  part  thereof. 
On  any  excess  over  £50,000,  10  per  cent. 

Although  it  looks  complicated,  this  schedule  was  really 
quite  simple;  and  in  the  uniformity  of  the  progression  it 
might  well  serve  as  a  model  for  other  scales  of  progressive 
taxation.     It  might  be  more  simply  written  as  follows: 

On  estates  exceeding  £100 : 

2  per  cent  on  the  first  £1,000. 

3  per  cent  on  the  next  £4,000. 

4  per  cent  on  the  second  £5,000. 

5  per  cent  on  the  third  £5,000. 

6  per  cent  on  the  fourth  £5,000. 

7  per  cent  on  the  third  £10,000. 

8  per  cent  on  the  fourth  £10,000. 

9  per  cent  on  the  fifth  £10,000. 

10  per  cent  on  the  excess  over  £50,000. 

In  1885  ^  this  schedule  was  replaced  by  the  one  given  be- 
1 1885,  no.  21. 


245]  ^^^  BRITISH  EMPIRE  75 

low,  making  the  tax  heavier  in  most  cases,  with  an  addi- 
tional rate  for  strangers  in  blood: 

On  amounts  not  exceeding  iioo,  no  duty. 

On  amounts  exceeding  £100  and  not  exceeding  ii,ooo: 

On  the  first  iioo,  no  duty, 

On  the  remainder,  2^  per  cent. 
On  amounts  exceeding  £1,000  and   not  exceeding  £5,000, 
3^  per  cent. 

On  amounts  exceeding  £5,000,  up  to  £20,000,  7  per  cent. 
On  £20,000  and  any  greater  amount,  10  per  cent. 

Strangers  in  blood,  except  adopted  children,  pay  three 
per  cent  in  addition  to  the  above  rates,  making  the  maximum 
rate  thirteen  per  cent.  The  children,  step-children,  and 
grandchildren  of  the  deceased  are  taxed  at  one-half  the  re- 
gular rates ;  the  surviving  wife  or  husband  is  entirely  exempt 
except  in  the  case  of  a  limited  estate,  and  is  entitled  to  an 
abatement  of  half  the  tax  in  the  case  of  a  life  interest  in 
property  not  capable  of  yielding,  at  six  per  cent,  an  annual 
income  of  five  hundred  pounds.  Settlements  and  deeds  of 
gift  ^  are  subject  to  the  tax. 

Debts,  funeral  expenses,  and  testamentary  expenses  are 
deducted.  It  is  the  duty  of  the  administrator  to  file  with 
the  Commissioner  of  Stamps  within  six  months  from  the 
grant  of  administration  a  statement  showing  the  amount  of 
the  property  and  charges,  and  to  pay  the  duty  on  the  final 
balance  of  the  estate. 

The  Australasian  states  realized  the  following  amounts 
from  inheritance  taxes  in  the  fiscal  year  1903-4: 

1 1891,  no.  30,  §  8. 


76  THE  INHERITANCE  TAX  [246 

Potmds. 

New  South  Wales 225,115 

Victoria 308,531 

Queensland 96,454 

South  Australia 72,926 

Western  Australia 21,759 

Tasmania 4,75o 

Commonwealth 729,535 

New  Zealand 142,917 

Australasia 872,452 

III.  The  Cape  of  Good  Hope 

Cape  Colony  has  had  a  succession  duty  since  1864/    The 
1  Act  no.  5, 

rates  are  one  per  cent  for  lineal  descendants  and  ancestors, 
two  per  cent  for  brothers  and  sisters,  three  per  cent  for 
descendants  of  a  brother  or  sister,  and  five  per  cent  for  more 
distant  relatives  and  strangers.  The  surviving  husband 
or  wife  is  exempt.  No  duty  is  payable  on  any  succession  of 
less  than  twenty  pounds,  on  any  child's  portion  of  less  than 
one  hundred  pounds,  nor  in  any  case  where  the  value  of  the 
whole  estate  is  less  than  one  hundred  pounds.  Bequests  to 
certain  charitable  institutions,  such  as  hospitals  and  asylums, 
are  exempt;  but  trustees  for  other  public  purposes  pay  the 
maximum  duty  of  five  per  cent.  Donations  mortis  causa 
are  taxed  at  the  same  rates  as  successions. 

IV.  India 
The  central  government  of  India  imposes  a  court  fee  of 
two  per  cent  on  probates  of  wills  and  letters  of  administra- 
tion when  the  value  of  the  estate  exceeds  one  thousand 
rupees.  The  amount  received  from  this  source  is  not  separ- 
ately reported,  but  it  is  much  less  than  a  corresponding  tax 
would  yield  in  almost  any  other  country,  because  of  the 
peculiar  joint  family  system  of  property  prevailing  among 


247]  '^^^  BRITISH  EMPIRE  yy 

the  Hindoos.  According  to  Hindoo  laws,  the  child  ac- 
quires his  share  in  the  joint  family  property  at  birth,  and 
the  share  of  each  member  varies  at  each  birth  or  death  in 
the  family,  without  any  legal  formalities.  Individuals,  how- 
ever, even  though  sharing  in  such  joint  family  property, 
may  have  self-acquired  property  in  addition,  and  on  this  the 
probate  fee  is  payable  at  death. 

V.  Canada 

With  the  exception  of  light  probate  duties  which  were  in 
most  cases  scarcely  more  than  fees,  there  were  no  inherit- 
ance taxes  in  Canada  until  1892,  when  this  form  of  taxation 
was  resorted  to  by  four  of  the  principal  provinces  almost 
simultaneously.  All  seven  of  the  principal  provinces  now 
have  succession  duties  with  elaborate  progressive  scales. 

One  of  the  most  interesting  of  inheritance  taxes  was  that 
introduced  in  Ontario  by  the  act  of  April  14,  1892.  It  was 
worthy  of  note  in  many  ways,  being  especially  remarkable 
for  its  generous  exemptions,  for  its  high  progressive  rates 
for  direct  heirs,  and  for  its  purpose,  the  support  of 
asylums  and  charitable  institutions.  In  short,  it  was  not 
so  much  a  general  tax  as  a  demand  upon  the  wealthy  resi- 
dents of  the  province  to  leave  part  of  their  wealth  for  bene- 
volent purposes.     The  act  began  as  follows : 

Whereas  this  province  expends  very  large  sums  annually 
for  asylums  for  the  insane  and  idiots,  and  for  institutions  for 
the  blind  and  for  deaf  mutes,  and  towards  the  support  of  hos- 
pitals and  other  charities,  and  it  is  expedient  to  provide  a  fund 
for  defraying  part  of  the  said  expenditure  by  a  succession  duty 
on  certain  estates  of  persons  dying  as  hereinafter  mentioned ; 

Therefore  Her  Majesty,  by  and  with  the  advice  and  consent 
of  the  Legislative  Assembly  of  the  Province  of  Ontario,  enacts 
as  follows: — 

All  estates  not  exceeding  $10,000,  and  individual  shares 


yS  THE  INHERITANCE  TAX  [248 

not  exceeding-  two  hundred  dollars,  were  exempt ;  and  the 
direct  heirs  were  taxable  only  when  the  whole  estate  ex- 
ceeded $100,000.  The  decedent's  father,  mother,  husband, 
wife,  children,  grandchildren,  daughters-in-law,  and  sons- 
in-law  paid  two  and  one-half  per  cent  when  the  estate  was 
between  $100,000  and  $200,000  in  value,  and  five  per  cent 
when  it  exceeded  $200,000;  the  grandparents  and  more  re- 
mote ancestors,  brothers  and  sisters  and  their  descendants, 
and  uncles  and  aunts  and  their  descendants  paid  five  per 
cent,  and  all  other  persons  ten  per  cent,  whenever  the  es- 
tate exceeded  $10,000  in  value. 

Subsequent  legislation  has  greatly  elaborated  the  schedule 
of  rates  and  has  modified  the  exemptions  and  even  the  pur- 
pose for  which  the  tax  was  levied.  According  to  the  Suc- 
cession Duty  Act  of  1907,^  the  rates  applicable  to  the  de- 
cedent's grandparents,  parents,  husband  or  wife,  children, 
sons-in-law  and  daugthers-in-law  are  as  follows : 

Where  the  estate —  Per  cent. 

Exceeds  $50,000  and  does  not  exceed  $75,000 i 

"  75,000  "  "  100,000 2 

"        100,000  "  "  150,000 3 

"        150,000  "  "  200,000 4 

"        200,000 S 

Where  the  share  of  any  one  person  exceeds  $100,000,  how- 
ever, an  additional  tax  is  levied  according  to  the  following 
scale : 

Where  the  amount  passing  to  one  person —  Per  cent. 

Exceeds  $100,000  and  does  not  exceed  $200,000 i 

"  200,000  "  "  400,000 15^ 

"  400,000  "  "  600,000 2 

"         600,000  "  "  800,000 2^ 

"         800,000 3 

Thus  the  maximum  rate  for  direct  heirs  is  eight  per  cent. 
1  7  Edw.  VII,  chap.  10. 


249] 


THE  BRITISH  EMPIRE 


79 


Whenever  the  value  of  the  estate  exceeds  $i  0,000,  so 
much  of  it  as  passes  to  any  lineal  ancestor  more  remote  than 
parent  or  grandparent,  or  to  the  decedent's  brothers  or  sis- 
ters, uncles  or  aunts,  or  any  descendant  thereof,  is  taxed  at 
the  rate  of  five  per  cent,  with  the  following  additions  when 
more  than  $50,000  passes  to  any  one  person : 

Where  the  amount  passing  to  one  person —  Per  cent. 

Exceeds  50,000  and  does  not  exceed  $100,000 i 

150,000 lyi 

200,000 2 

250,000 zyi 

300,000 3 

350,000 3J4 

400,000 4 

450,000 45^ 

5 


100,000 

150,000 

200,000 

250,000 

(       « 

300,000 

350,000 

400,000       "       " 

450,000 

So  much  of  an  estate  exceeding  $10,000  as  passes  to  any 
more  distant  collateral  relative  than  those  named  above,  or 
to  a  stranger  in  blood,  is  taxed  at  the  rate  of  ten  per  cent. 

Individual  shares  of  three  hundred  dollars  or  less  are 
exempt,  as  well  as  estates  of  $10,000  or  $50,000,  according 
to  the  degree  of  relationship  of  the  heirs  to  the  decedent. 
Bequests  for  religious,  charitable,  or  educational  purposes 
to  be  carried  out  in  Ontario,  or  by  a  corporation  or  person 
resident  in  Ontario,  are  also  exempt,  and  life  insurance  pay- 
able to  a  direct  heir  is  exempt  when  it  does  not  exceed 
$5,000. 

The  succession  tax  is  now  levied  for  general  provincial 
purposes. 

Besides  this  tax  there  are  approximately  proportional 
probate  fees,^  both  for  the  provincial  treasury  and  for  the 
judges  of  the  surrogate  courts.  Together  these  fees  amount 
in  most  cases  to  $1.50  for  each  $1,000  of  the  estate;  the 


1  Revised  Statutes  of  Ontario,  chap.  50. 


8o  THE  INHERITANCE  TAX  [250 

government  fee  is  fifty  cents  for  each  $1,000,  and  the  judge's 
fee  is  just  double  the  government  fee  except  in  the  case  of 
estates  of  less  than  $3,000,  when  it  is  somewhat  more. 

Before  the  Ontario  law  of  1892  had  been  finally  adopted, 
the  Nova  Scotia  House  of  Assembly  unanimously  resolved 
to  establish  a  very  similar  tax  for  a  similar  purpose/  The 
act  ^  which  was  finally  passed  on  the  30th  of  April  of  that 
year  has  remained  in  force  with  only  minor  changes.  The 
exemptions  are  estates  not  exceeding  $25,000  inherited  by 
the  immediate  relatives  and  estates  not  exceeding  $5,000 
in  other  cases,  and  individual  shares  of  two  hundred  dollars 
or  less.  There  are  three  classes  of  heirs,  as  in  Ontario; 
the  nearest  relatives  pay  two  and  one-half  per  cent  on  the 
excess  over  $25,000,  but  five  per  cent  on  any  excess  above 
$100,000;  the  second  class  pays  five  per  cent  and  the  third 
class  ten  per  cent  on  the  whole  amount. 

The  proceeds  of  this  tax  are  still  applied  to  the  care  of 
the  sick  and  insane,  and  the  support  of  other  charities. 
Property  bequeathed  for  religious,  charitable,  or  educational 
purposes  is  exempt. 

The  probate  fees  in  Nova  Scotia  vary  slightly  with  the 
value  of  the  estate,  but  are  uniform  for  all  estates  above; 
$4,000.' 

The  passage  of  the  laws  of  1892  in  Ontario  and  Nova 
Scotia  was  followed  two  months  later  by  the  adoption  in 
Quebec  of  an  inheritance  tax  levied  according  to  somewhat 
different  principles  and  for  a  purely  fiscal  purpose.  The 
preamble  of  the  act  ^  contained  a  statement  of  the  provincial 
debt,  and  explained  the  insufficiency  of  the  revenue  to  meet 

^Journal  and  Proceedings  of  the  House  of  Assembly,  1892,  p.  loi. 

2  55  Vict.,  chap.  6. 

8  Revised  Statutes  of  Nova  Scotia,  1900,  title  28. 

*  55  and  56  Vict.,  chap.  17. 


251]  THE  BRITISH  EMPIRE  gl 

the  increased  expenditures  of  the  province.  To  meet  the 
deficiency  the  act  imposed  an  inheritance  tax  and  a  tax  on 
transfers  of  real  estate.  Direct  heirs  were  exempt  from 
the  former  unless  the  net  value  of  the  estate  exceeded  $10,- 
000;  the  rate  was  then  one  per  cent.  Brothers  and  sisters 
and  their  descendants  paid  three  per  cent;  other  collateral 
relatives  were  divided  into  two  classes,  which  paid  six  and 
eight  per  cent  respectively;  and  the  rate  for  strangers  in 
blood  was  ten  per  cent. 

In  recent  amendments  ^  an  elaborate  progressive  scale 
has  been  developed.  Direct  heirs  now  pay  from  one  to  five 
per  cent,  with  a  deduction  of  five  thousand  dollars  from  the 
value  of  the  estate;  and  when  the  amount  passing  to  any 
one  such  heir  exceeds  $100,000  there  is  an  additional  tax  of 
from  one  to  three  per  cent,  the  latter  rate  applying  when 
the  amount  exceeds  $800,000.  On  amounts  not  exceeding 
$10,000,  brothers  and  sisters  and  their  descendants  pay  five 
per  cent,  uncles  and  aunts  and  their  descendants  six  per 
cent,  great-uncles  and  great-aunts  and  their  descendants 
seven  per  cent,  and  other  collateral  relatives  eight  per  cent ; 
when  the  amount  exceeds  $10,000,  one-half  of  one  per  cent 
is  added  to  these  rates  in  the  first  three  cases  and  one  per 
cent  in  the  fourth  case.  Strangers  in  blood  pay  ten  per 
cent.  When  the  amount  passing  to  any  one  collateral  heir 
or  stranger  exceeds  $50,000,  there  is  a  further  duty  gradu- 
ated from  one  to  five  per  cent.  Thus  it  results  that  the 
maximum  rate  is  fifteen  per  cent,  while  direct  heirs  pay  as 
high  as  eight  per  cent. 

Whenever  property  devolves  to  any  person  domiciled  out- 
side of  the  British  Empire,  or  to  any  association  having  its 
chief  place  of  business  outside  of  the  Empire,  there  is  an 
additional  duty  of  five  per  cent.     The  exemption  in  favor  of 

16  Edw.  VII,  chap.  11;  7  Edw.  VII,  chap.  14. 


82  THE  INHERITANCE  TAX  [252 

religious,  charitable,  and  educational  bequests  is  limited  to 
$1000  in  each  case. 

Nezv  Bninszvick  also  imposed  a  succession  tax  in  1892. 
The  rates  at  present  in  force  are  as  follows: 

Parents,  husband  or  wife,  children,  brothers  and  sisters, 
sons-in-law  and  daughters-in-law,  one  and  one-fourth  per  cent 
up  to  $50,000,  and  two  and  one-half  per  cent  of  the  excess 
above  that  amount;  when  the  estate  exceeds  $200,000,  five  per 
cent  on  the  whole  property. 

Grandparents,  uncles  and  aunts  and  their  descendants, 
grandchildren,  etc.,  five  per  cent. 

More  distant  collateral  relatives  and  strangers  in  blood,  ten 
per  cent. 

The  exemptions  include  all  estates  of  $5,000  or  less,  es- 
tates of  $10,000  or  less  passing  to  the  second  class  of  rela- 
tives, and  estates  of  $50,000  or  less  passing  to  the  immedi- 
ate relatives  of  the  decedent;  also  individual  shares  of  two 
hundred  dollars  or  less,  and  bequests  for  religious,  chari- 
table, and  educational  purposes. 

Where  the  property  goes  to  any  person  residing  out  of 
New  Brunswick,  the  rate  of  taxation  is  doubled.^ 

There  is  also  a  system  of  regressive  probate  fees  to  pay 
the  salaries  of  judges  and  registrars  and  other  expenses. 
For  estates  of  $1,000  the  fee  amounts  to  two  per  cent;  but 
for  larger  estates  it  is  proportionately  much  less.^ 

In  Manitoba  the  same  rates  apply  to  all  classes  of  heirs, 
but  the  immediate  relatives  are  favored  with  larger  exemp- 
tions than  others.  According  to  the  original  Succession 
Duty  Act  of  1893,^  the  rates  ranged  from  one  per  cent  on 
inheritances  of  less  than  $25,000  to  ten  per  cent  on  those  of 

^  Consolidated  Statutes  of  New  Brunswick,  1903,  chap.  17. 
2  Ibid.,  chap.  118.  ^  56  Vict.,  chap.  31. 


253]  -^-^^  BRITISH  EMPIRE  g^ 

$1,000,000  or  more;  but  the  tax  has  been  increased,'  with- 
out raising  the  maximum  rate,  by  making  that  rate  apply  to 
all  amounts  of  $500,000  and  upwards.  The  rates,  which 
are  payable  on  the  entire  estate  in  each  case,  are  as  follows : 

Per  cent. 

Up  to  $25,000 I 

Over   25,000  and  up  to  $50,000 2 

"    50,000   "   "   100,000 3 

"    100,000   "   "   150,000 4 

"    150,000   "   "   200,000 5 

200,000   "   "   300,000 6 

"    300,000   "   "   400,000 7 

"    400,000   "   '■   500,000 8 

"    500,000 10 

The  exemptions  are  estates  not  exceeding  $4,000,  in- 
dividual shares  not  exceeding  $2,000,  and  amounts  not  ex- 
ceeding $25,000  passing  to  direct  heirs. 

There  is  also  a  probate  fee  of  fifty  cents  for  every  $1,000 
of  the  estate,  the  proceeds  of  which  go  to  a  special  fund  for 
the  maintenance  of  the  administration  of  justice  by  the 
courts  of  the  province.  In  addition  to  this,  the  judge  is 
entitled  to  a  slightly  regressive  fee  which  amounts  in  most 
cases  to  one  dollar  for  every  $1,000  or  $1,500,  but  is  never 
less  than  two  dollars." 

Prince  Edzvard  Island,  by  the  Act  of  May  19,  1894,^  im- 
poses a  succession  tax  at  the  following  rates : 

Parents,  husband  or  wife,  children,  grandchildren,  brothers 
and  sisters  or  their  children,  sons-in-law  and  daughters-in-law, 
one  and  one-half  per  cent;  when  the  estate  exceeds  $50,000. 
two  and  one-half  per  cent. 

Grandparents  and  more  remote  ancestors,  uncles  and  aunts 
and  their  descendants,  two  and  one-half  per  cent. 

1  4  and  5  Edw.  VII,  chap.  45. 

2  Revised  Statutes  of  Manitoba,  chap.  37.  ^  57  Vict.,  chap.  5. 


84  THE  INHERITANCE  TAX  [254 

Other  relatives  and  strangers  in  blood,  seven  and  one-half 
per  cent. 

Estates  not  exceeding  $3,000  are  exempt,  and  when  im- 
mediate relatives  inherit,  estates  of  $10,000  or  less  are 
exempt.  The  tax  does  not  apply  to  bequests  for  religious, 
charitable,  or  educational  purposes  within  the  province. 

British  Columbia  adopted  a  succession  duty  in  1894,^ 
with  rates  from  one  to  five  per  cent,  according  to  amount, 
but  with  half  rates  for  direct  heirs,  exemptions  of  $25,000 
in  the  case  of  estates  passing  to  direct  heirs  and  $5000  in 
other  cases,  and  an  abatement  of  $5000  in  the  former  case. 
The  schedule  of  rates  has  since  been  somewhat  modified.^ 
Where  the  property  of  the  deceased  exceeds  $25,000  in 
value,  and  passes  either  in  whole  or  in  part  to  the  father, 
mother,  husband  or  wife,  children,  grandchildren,  daugh- 
ters-in-law or  sons-in-law,  the  rates  are  as  follows : 

Per  cent. 

Upon  the  value  up  to  $100.000 1.5 

Where  the  value  reaches  $100,000,  but  does  not  reach  $200,000. .  2.5 
Where  the  value  exceeds  $200,000 5 

On  property  passing  to  grandparents  or  more  distant 
lineal  ancestors,  brothers  and  sisters  and  their  descendants, 
uncles  and  aunts  and  their  descendants,  the  rate  is  five  per 
cent  of  the  value  in  excess  of  $5,000;  more  distant  relatives 
and  strangers  in  blood  pay  ten  per  cent  of  the  value  in  ex- 
cess of  $5,000. 

The  proportional  probate  fees  which  have  been  exacted 
for  many  years  do  not  seem  to  have  been  repealed  when 
the  succession  duty  was  adopted.  The  fees  were  fixed 
originally  by  the  Chief  Justice  of  the  Supreme  Court,  but 
more  recently  by  a  commission  appointed  by  the  Lieutenant- 

157  Vict.,  chap.  47.         262  Vict.,  chap.  68;  64  Vict.,  chap.  35. 


255]  '^'^^  BRITISH  EMPIRE  gr 

Governor  in  Council/  There  was  formerly  a  uniform 
rate  of  three  per  cent  on  personal  estates  alone;  but  since 
1890  the  rates  have  been  one  per  cent  for  the  decedent's 
father,  mother,  husband,  brothers  and  sisters,  and  five  per 
cent  for  all  other  persons  except  the  widow  and  children, 
who  are  exempt.^ 

The  succession  duties  received  by  some  of  the  provinces 
in  the  year  1905-1906  were  as  follows: 

Ontario $1,015,713 

New  Brunswick 12,057 

Prince  Edward  Island 6,703  ' 

Manitoba 7I.3IO 

VI.  A  Conflict  of  Jurisdiction 
While  the  Finance  Act  of  1894  was  before  the  Parliament 
at  Westminster,  the  London  representatives  of  Canada,  the 
Australasian  colonies,  and  the  Cape  of  Good  Hope  joined 
in  a  memorial  protesting  against  the  application  of  the 
estate  duty  to  property  situated  in  the  colonies.  ^  Sir  Vernon 
Harcourt  declared  that  there  was  no  proposal  to  tax  any 
property  in  the  colonies  that  was  not  already  subject  to 
legacy  duty,  but  friends  of  the  colonies  in  Parliament  pointed 
out  that  the  legacy  duty  was  imposed  before  the  colonies 
became  self-governing.  Still  the  Chancellor  of  the  Ex- 
chequer would  not  consent  to  a  remission  of  estate  duty  on 
all  colonial  property,  but  he  gave  his  consent  to  the  deduc- 
tion of  death  duties  locally  due  from  the  amount  otherwise 
due  the  Crown,  conditioned  upon  a  similar  treatment  of 
British  property  by  the  colonies.  Unconditional  exemption 
of  colonial  property,  he  declared,  "  would  be  putting  a  tre- 

1  35  Vict.,  no.  34. 

2  Rules  of  Court,  1890,  Appendix  M,  p.  cxiii. 

3  Nine  months  only. 

*  Accounts  and  Papers,  1894,  C. — 7433. 


86  THE  INHERITANCE  TAX  [256 

mendous  premium  on  colonial  investments;"  a  man  might 
even  draw  a  check  and  transfer  all  his  personal  property 
to  colonial  banks  a  month  before  his  death.  Harcourt 
scouted  the  idea  that  the  proposal,  even  in  its  original  form, 
was  similar  to  that  which  led  to  the  American  revolution. 
Yet  it  is  safe  to  say  that  the  conference  of  colonial  repre- 
sentatives, then  assembling  at  Ottawa  to  consider  how  best 
to  consolidate  the  Empire,  and  to  pledge  anew  their  faith 
therein,  would  have  had  its  enthusiasm  seriously  dampened 
if  the  bill  had  not  been  modified. 

Even  in  its  final  shape  the  bill  was  far  from  satisfactory 
to  the  colonies.  The  Prime  Minister  of  Canada  wired: 
"  Council  is  of  opinion  that  strong  opposition  should  be 
made  to  proposed  policy  of  levying  death  duties  on  prop- 
erty in  Canada  even  with  the  amendment  proposed."  It 
was  predicted  that  the  modification  would  result  in  the 
death  duties  in  all  the  colonies  being  increased  to  the  same 
amount  as  the  proposed  estate  duty,  so  that  no  revenue 
would  result,  and  that  the  colonial  governments,  in  propos- 
ing these  increased  taxes,  would  explain  that  they  were 
forced  upon  them  by  the  Imperial  act,  "  with  the  result  of 
endangering  that  loyal  devotion  to  British  institutions " 
existing  in  the  colonies.  "  I  greatly  fear,"  wrote  the  High 
Commissioner  for  Canada,  "  that  a  serious  question  will  be 
raised  as  to  the  right  of  Her  Majesty's  Government,  under 
the  free  institutions  that  have  been  accorded  to  the  colonies, 
to  enact  legislation  which  will  have  the  effect  of  imposing 
taxation  upon  property  situate  in  the  colonies."  ^ 

^Accounts  and  Papers,  1894,  C. — 7451. 


CHAPTER  VII  : 

THE  UNITED  STATES 

I.  Federal  Inheritance  Taxes 

Very  early  in  the  history  of  the  American  Union,  sug- 
gestions were  made  looking  to  the  establishment  of  in- 
heritance taxes  of  various  kinds.  On  April  17,  1794,  a 
special  revenue  committee  of  the  National  House  of  Rep- 
resentatives recommended  a  system  of  stamp  duties,  to  in- 
clude the  following: 

On  inventories  of  the  effects  of  deceased  persons,  ten  cents. 

On  receipts  for  legacies,  or  shares  of  personal  estate,  where 
the  sum  is  above  $50  and  not  exceeding  $100^  twenty- five 
cents;  more  than  $100  and  not  exceeding  $500,  fifty  cents;  for 
every  further  sum  above  $500,  one  dollar.  Not  to  extend  to 
wives,  children,  or  grandchildren. 

On  probates  of  wills,  and  letters  of  administration,  fifty 
cents.^ 

Two  years  later  the  Committee  on  Ways  and  Means  re- 
ported to  the  House 

That  a  duty  of  two  per  centum  ad  valorem  ought  to  be  im- 
posed on  all  testamentary  dispositions,  descents,  and  succes- 
sions to  the  estates  of  intestates,  excepting  those  to  parents, 
husbands,  wives  or  lineal  descendants. - 

The  first  of  these  proposals  was  in  great  part  adopted  by 

1  American  State  Papers  in  Finance,  i :  277.  ^  Ibid.,  409. 

257]  87 


88  THE  INHERITANCE  TAX  [258 

the  Stamp  Act  of  July  6th,  1797/  which  imposed  a  tax 
somewhat  similar  to  the  original  English  legacy  duty  upon 
receipts  for  legacies  and  shares  of  personal  estate  where  the 
amount  was  more  than  fifty  dollars.  The  tax  was  twenty- 
five  cents  when  the  amount  was  not  more  than  one  hundred 
dollars,  fifty  cents  when  the  amount  was  above  one  hundred 
dollars  and  not  more  than  five  hundred  dollars,  and  a  dollar 
additional  for  every  further  sum  of  five  hundred  dollars; 
but  the  widow,  children,  and  grandchildren  were  exempt. 
The  act  provided  that  every  receipt  for  a  legacy  or  share  of 
personal  estate  should  express  the  true  sum  paid,  in  default 
of  which  every  person  concerned  either  in  giving  or  taking 
the  receipt  was  made  liable  to  a  penalty  of  twenty  dollars; 
but  no  penalty  was  prescribed  for  not  giving  any  receipt  at 
all.     The  act  also  imposed  a  tax  of  fifty  cents  on  inventories. 

This  act  was  to  take  effect  January  ist,  1798,  and  continue 
in  operation  five  years ;  but  a  later  act  ^  postponed  its  com- 
mencement six  months,  and  it  was  repealed,^  together  with 
the  other  acts  imposing  internal  taxes,  before  the  time  set 
for  its  expiration.  The  repeal  took  effect  July  ist,  1802, 
just  four  years  after  the  act  went  into  operation. 

There  was  no  inheritance  tax  during  the  War  of  18 12, 
but  there  probably  would  have  been  if  the  war  had  continued 
a  few  weeks  longer.  Secretary  Dallas,  in  his  report  of 
January  21st,  18 15,  recommended  a  system  of  ten  differ- 
ent taxes,*  of  which  the  first  three  were  inheritance  taxes, 
proposed  in  the  following  language : 

I.  A  tax  upon  inheritances  and  devises,  to  be  paid  by  heirs  or 

devisees,  may  be  made  to  produce $900,000 

^  U.  S.  Statutes  at  Large,  i,  527. 

2  Ibid.,  i,  536.  3  Ibid.,  ii,  148. 

*  American  State  Papers  in  Finance,  ii,  887. 


259]  THE  UNITED  STATES  89 

2.  A  tax  upon  bequests,  legacies,  and  statutory  distribution,  to 

be  paid  by  the  legatees,  or  legal  representatives,  may  be 

made  to  produce 500,000 

3.  An    auxiliary   tax    upon    all    testamentary   instruments    and 

letters  of  administration,  to  be  paid  by  the  executors  and 
administrators,  may  be  made  to  produce 200,000 

But  the  treaty  of  peace  had  already  been  signed,  and  the 
levying  of  inheritance  taxes  was  postponed  until  after  the 
outbreak  of  the  Civil  War. 

The  war  revenue  act  of  July  ist,  1862,  imposed  what  was 
known  as  the  "  legacy  tax  "  on  the  devolution  of  personal 
property,  and  stamp  taxes  on  probates  of  wills  and  letters  of 
administration/    The  legacy  tax  was  graduated  as  follows: 

Per  cent. 

Lineal  issue,  lineal  ancestors,  brothers  and  sisters 75 

Descendants  of  a  brother  or  sister 1.5 

Brothers   and  sisters   of   a   father  or   mother,   and   descendants 

thereof 3 

Brothers  and  sisters  of  a  grandfather  or  grandmother,  and  de- 
scendants thereof 4 

Other  collateral  relatives,  strangers  in  blood,  and  bodies  politic 
or  corporate 5 

The  tax  was  payable  only  when  the  entire  personal  estate 
of  the  deceased  exceeded  $1,000  in  value;  and  the  surviving 
husband  or  wife  was  exempt.  Gifts  and  sales  intended  to 
take  effect  after  the  death  of  the  grantor  were  subject  to  the 
tax.  Every  executor  and  administrator  was  required  to 
furnish  a  statement  of  the  personal  property,  verified  by 
oath,  to  the  assistant  assessor  of  his  district,  and  to  pay  the 
tax  before  distributing  the  property.  Only  the  clear  value 
was  taxable. 

The  tax  on  probates  of  wills  and  letters  of  administration 
was  levied  according  to  the  following  scale : 

^  U.  S.  Statutes  at  Large,  xii,  483,  485. 


90  THE  INHERITANCE  TAX  [260 

On  estates  not  exceeding  $2,500 $0.50 

Exceeding  $2,500,  not  exceeding  $5,000 i.oo 

"             5,000,         "         "         20,000 2.00 

"           20,000,         "         "         50,000 5.00 

"           50.000,         "         "        100,000 10.00 

"         100,000,         "         "        150,000 20.00 

For  every  additional  $50,000  or  fraction  thereof,  $10. 

The  act  of  June  30th,  1864,  increased  these  taxes,  and 
supplemented  the  legacy  tax  by  a  "  succession  tax  "  on  real 
estate/  The  exemptions  remaining  the  same  as  before,  the 
rates  of  the  legacy  tax  were  fixed  as  follows : 

Per  cent. 

Lineal  issue,  lineal  ancestors,  brothers  and  sisters i 

Descendants  of  a  brother  or  sister 2 

Brothers   and   sisters   of    a   father   or   mother,   and   descendants 

thereof 4 

Brothers  and  sisters  of  a  grandfather  or  grandmother,  and  de- 
scendants thereof 5 

Other  collateral  relatives,  strangers  in  blood,  and  bodies  politic 
or  corporate 6 

These  same  rates  were  made  applicable  to  the  succession 
tax  on  real  estate,  except  that  in  that  case  brothers  and 
sisters  were  taxed  two  per  cent  instead  of  one  per  cent. 
But  there  was  no  exemption  of  small  estates  from  the  suc- 
cession tax,  nor  any  exemption  at  first  in  favor  of  husband 
or  wife.  A  retroactive  clause  in  the  amendatory  act  of  the 
next  year  exempted  wives,  but  not  husbands."  It  was  ex- 
pressly provided  that  real  estate  subject  to  a  trust  for  charit- 
able purposes  should  be  taxed  at  the  maximum  rate  of  six 
per  cent. 

Persons  liable  to  the  succession  tax  were  required  to  give 
notice  to  the  internal  revenue  officials,  with  accounts  show- 

1  U.  S.  Statutes  at  Large,  xiii,  285,  287.  -  Ihid.,  xiii,  481. 


26 1  ]  THE  UNITED  STATES  qi 

ing  the  value  of  the  property  and  other  particulars.  A 
penalty  equal  to  ten  per  cent  of  the  amount  of  the  tax  was 
prescribed  for  failure  to  furnish  returns  within  ten  days 
after  being  notified,  or  for  failure  to  pay  the  tax  within 
ten  days  of  the  notification  of  assessment. 

Deeds  of  gift  without  adequate  consideration,  even  when 
immediately  conferring  possession,  were  made  liable  to  the 
succession  tax;  and  the  Treasury  officials  so  construed  this 
provision  as  to  tax  transfers  with  manifestly  inadequate 
consideration  on  the  full  amount  of  the  transfer,  and  not 
merely  on  the  excess  of  the  value  over  the  consideration.^ 
Marriage  was  regarded  as  a  value  consideration,  and  hence 
conveyances  made  in  consideration  of  marriage  were  not 
taxable.^ 

The  same  act  which  imposed  the  succession  tax  increased 
the  tax  on  probates  and  letters  of  administration  to  one 
dollar  for  estates  not  exceeding  $2,000,  plus  fifty  cents  for 
every  additional  $1,000  or  fraction  thereof.^  The  bonds  of 
administrators  and  executors  were  subjected  to  a  uniform 
tax  of  one  dollar.*  Estates  of  $1,000  and  less  were  ex- 
empted from  these  stamp  taxes  by  the  amendatory  act  of 
March  2d,   1867.^ 

In  January,  1866,  the  special  Revenue  Commission  of 
which  David  A.  Wells  was  chairman  reported  that  up  to 
that  time  the  legacy  and  succession  taxes  had  been  prac- 
tically a  dead  letter,  having  yielded  only  $546,703  during 
the  previous  fiscal  year.  The  commission  recommended 
certain  administrative  changes  to  make  the  execution  of  the 
law  more  effectual,  and  predicted  that  the  annual  product 

"^  Internal  Revenue  Record,  iii,  197.  ^  Ibid.,  v,  115. 

3  U.  S.  Statutes  at  Large,  xiii,  300. 

*  Ibid.,  xiii,  299;  Internal  Revenue  Record,  v,  60. 

°  U.  S.  Statutes  at  Large,  xiv,  475. 


92  THE  INHERITANCE  TAX  [262 

of  these  taxes  would  be  thereby  increased  to  at  least  $3,- 
000,000.  It  was  estimated  that,  allowing  thirty-two  years 
as  the  life-time  of  a  generation,  these  taxes,  even  at  the 
minimum  rate  of  one  per  cent,  ought  to  amount  each  year 
to  -jAtt  of  the  wealth  of  the  country,  or  $5,000,000;  but 
the  commission  evidently  realized  that  such  calculations  as 
this  could  not  be  relied  upon  as  accurate,  and  modified  its 
prediction  accordingly/ 

Up  to  this  time  no  penalty  had  been  prescribed  for  the 
failure  of  executors  and  administrators  to  furnish  the  state- 
ments required  of  them.  The  act  of  July  13th,  1866,  pro- 
vided for  a  penalty  not  to  exceed  $1,000  for  wilful  neglect, 
refusal,  or  false  statement.  Persons  liable  to  the  succession 
tax  were  now  required  to  give  notice  of  their  liability  with- 
in thirty  days  after  acquiring  possession  of  the  property. 
This  act  also  provided  that  any  shares  of  personal  property 
going  to  a  minor  child  of  the  decedent  should  be  taxable 
only  on  the  excess  above  $1,000.^ 

Hon.  David  A.  Wells,  in  his  second  annual  report  as 
Special  Commissioner  of  the  Revenue,  submitted  to  Con- 
gress in  January,  1868,  complained  that  the  government  did 
not  yet  collect  in  legacy  and  succession  taxes  more  than  half 
the  amount  to  which  it  was  rightly  entitled,  although  there 
had  been  a  large  increase  the  preceding  year.  He  recom- 
mended the  appointment  of  special  officers  to  have  charge  of 
this  portion  of  the  internal  revenue.^ 

But  the  reduction  of  the  internal  revenue  was  now  the 
order  of  the  day.  The  legacy  and  succession  taxes  were  re- 
pealed by  section  3  of  the  act  of  July  14,  1870,^  the  repeal 

^  Reports  of  the  United  States  Revenue  Commission,  p.  31. 

^  U.  S.  Statutes  at  Large,  xiv,  140. 

3  Report  of  the  Special  Commissioner  of  the  Revenue,  1868,  p.  40. 

*  U.  S.  Statutes  at  Large,  xvi,  256. 


263] 


THE  UNITED  STATES 


93 


going  into  effect  October  ist  of  the  same  year.  Section  27 
of  this  act  provided  that  taxes  already  levied  but  not  paid 
on  bequests  for  literary,  educational,  and  charitable  pur- 
poses should  not  be  collected.  The  probate  and  administra- 
tion tax  remained  in  force  two  years  longer,  but  was  re- 
pealed, together  with  the  other  stamp  taxes,  by  the  act  of 
June  6,  1872,^  the  repeal  going  into  effect  October  ist  of 
that  year. 

During  the  six  years  in  which  the  legacy  and  succession 
duties  were  both  in  force,  their  annual  product  increased 
from  half  a  million  to  three  million  dollars,  and  from  one- 
fourth  of  one  per  cent  to  one  and  two-thirds  per  cent  of  the 
total  internal  revenue.  The  receipts  for  each  year  are 
shown  below : 


Fiscal  Year. 

Legacy  Tax. 

Succession  Tax. 

Total. 

Percentage 

of  Internal 

Revenue. 

1862-63 
1863-64 
1864-65 

;?56,592.6i 

^[56,592.61 
311,161.02 
546,703.17 

0.138 

506,751.85 

^39,951-32 

0.259 

1865-66 

924,823.97 

246,154.88 

1,170,978.85 

0.376 

1866-67 

1,228,744.96 

636,570.19 

1,865,315.15 

0.701 

1867-68 

1,518,387.64 

1,305,023.60 

2,823,411.24 

1477 

1868-69 

1,244,837.01 

1,189,756.22 

2,434,593-23 

1.521 

1869-70 

1,672,582.93 

1,419,242.57 

3,091,825.50 

1.669 

1870-71 

1,430.087.34 

1,074,979.79 

2,505,067.13 

1-739 

Fully  two-thirds  of  the  proceeds  came  from  the  heirs  who 
^  U.  S.  Statutes  at  Large,  xvii,  256. 


94  THE  INHERITANCE  TAX  [264 

paid  at  the  minimum  rate.  About  sixty-five  per  cent  of  the 
legacy  tax  was  paid  by  direct  heirs  and  brothers  and  sisters, 
and  about  seventy-five  per  cent  of  the  succession  tax  was 
paid  by  direct  heirs  alone. 

In  the  income-tax  provisions  of  the  National  revenue 
act  of  1894,  income  was  so  defined  as  to  include  "  money 
and  the  value  of  all  personal  property  acquired  by  gift  or 
inheritance."  Whenever  the  sum  of  an  inheritance  and 
the  year's  income  proper  exceeded  $4000,  therefore,  the  ex- 
cess was  to  have  been  taxed  two  per  cent.  The  annulment 
of  the  income  tax  by  the  Supreme  Court  did  away  with 
this  inheritance-tax  feature,  which  was  regarded  as  an  in- 
separable part  of  the  income  tax.^ 

The  war  revenue  bill,  as  it  passed  the  lower  house  of  Con- 
gress at  the  end  of  April,  1898,  contained  among  the  stamp 
taxes  of  Schedule  A  a  tax  on  probates  o'f  wills  and  letters 
of  administration,  beginning  at  fifty  cents  for  small  estates, 
and  varying  from  about  one  twenty-five-hundredth  to  one 
ten-thousandth  of  the  value  of  larger  estates.  The  Senate 
Finance  Committee  struck  out  this  tax  and  inserted  instead 
a  tax  on  legacies  and  distributive  shares  of  personal  prop- 
erty only,  graduated  both  according  to  relationship,  as  were 
the  legacy  and  succession  taxes  of  the  Civil  War  period,  and 
also  according  to  amount.  The  following  minimum  per- 
centages were  established  for  amounts  from  $10,000^  to 
$25,000,  only  the  surviving  husband  or  wife  being  exempt: 

Per  cent. 

Lineal  issue,  lineal  ancestor,  brother  or  sister ^ 

Descendants  of  a  brother  or  sister 1J/2 

Brother  or  sister  of  a  father  or  mother,  and  descendants  thereof.  3 
Brother  or  sister  of  a  grandfather  or  grandmother,  and  de- 
scendants thereof 4 

More  distant  relatives,  strangers  in  blood,  and  bodies  politic  or 
corporate 5 

^  Pollock  vs.  Farmers'  Loan  and  Trust  Co.,  158  U.  S.  601,  637. 


265]  THE  UNITED  STATES  95 

These  rates  were  increased  one-half  for  amounts  between 
$25,000  and  $100,000,  doubled  for  those  between  $100,000 
and  $500,000,  multiplied  by  2j^  for  those  between  $500,000 
and  $1,000,000,  and  multiplied  by  3  for  those  of  more  than 
$1,000,000.  The  maximum  rate  was,  therefore,  fifteen  per 
cent.  Yet  there  was  scarcely  any  opposition  in  Congress 
to  this  highly  progressive  scale.  Senator  Lodge  did  criticise 
it  because  the  rates  were  apparently  made  to  depend  upon 
the  whole  amount  of  the  decedent's  personal  estate  instead 
of  upon  the  size  of  the  individual  legacies;  but  when  the 
matter  came  before  the  Supreme  Court  it  was  decided  that 
the  size  of  the  individual  shares  was  intended  to  determine 
the  rate.^ 

An  amendment  adopted  in  1901  "  exempted  bequests  for 
uses  of  a  religious,  literary,  charitable,  or  educational  char- 
acter, or  for  the  encouragement  of  art,  or  made  to  societies 
for  the  prevention  of  cruelty  to  children,  and  elaborated 
the  administrative  provisions. 

The  section  of  the  War  Revenue  Act  imposing  this  tax 
on  legacies  and  distributive  shares  was  repealed  by  the  act 
of  April  12,  1902.^ 

The  following  table  shows  the  receipts  from  this  tax,  and 
the  proportion  which  such  receipts  were  of  the  total  in- 
ternal revenue  while  the  tax  was  fully  in  force : 

1  Knowlton  vs.  Moore,  178  U.  S.  41. 

2  U.  S.  Statutes  at  Large,  xxxi,  946. 

3  Ibid.,  xxxii,  92. 


96 


THE  INHERITANCE  TAX 


[266 


Fiscal  Year. 

Receipts. 

Percentage  of 
Internal  Revenue. 

1898-1899 

^1,235,435.25 
2,884,491.55 
5,211,898.68 
4,842,966.52 

5.356,774-90 
2,072,132.12 

774,354-59 
142,148.22 

0.452 
0.977 
1.698 
1.781 
2.322 

1901-1902 

1904-1905 

1905-1906 

The  following  table,  giving  the  receipts  for  two  years  in 
detail,  indicates  that  more  than  two-thirds  of  the  entire 
amount  of  inheritance  taxes  was  paid  by  the  relatives  taxed 
at  the  lowest  rates : 


Lineal  issue  or  ancestor,  brother  or  sister  .... 

Descendants  of  a  brother  or  sister 

Brother  or  sister  of  the  father  or  mother,  or  a 
descendant  of  a  brother  or  sister  of  the  same. 

Brother  or  sister  of  the  grandfather  or  grand- 
mother, or  a  descendant  of  the  brother  or 
sister  of  the  same 

Any  other  degree  of  collateral  consanguinity 
than  herembefore  stated,  or  stranger  in 
blood 

Total 


1900-1901. 


3,495,920.54 
912,343.69 

68,767.37 

4,840.75 

730,026.33 


^5,211,898.68 


1901-1902. 


3,781,468.83 
639,940.42 

79,997-32 
4,082.84 

337,477-11 


$4,842,966.52 


267]  ^^^  UNITED  STATES  gy 

II.  Pennsylvania 
Pennsylvania  was  the  first  state  in  the  Union  to  levy  an 
inheritance  tax,  and  with  one  doubtful  exception  the  inherit- 
ance tax  was  the  first  state  tax  of  any  kind  in  Pennsylvania, 
being  antedated  only  by  a  duty  on  the  recording  of  certain 
legal  papers/  which  was  more  like  a  fee  than  a  true  tax. 
The  collateral-inheritance  tax  was  introduced  in  1826  for 
the  benefit  of  the  internal  improvement  fund,  and  has  re- 
mained in  force,  with  occasional  amendments,  to  the  present 
day.  As  the  Pennsylvania  act  of  April  7th,  1826,'  has  di- 
rectly or  indirectly  served  as  the  model  for  much  of  the 
subsequent  American  legislation  on  this  subject,  the  first 
section  is  worth  quoting: 

Sect.  i.  Be  it  enacted  by  the  Senate  and  House  of  Repre- 
sentatives of  the  Commonzvealth  of  Pennsylvania  in  General 
Assembly  met,  and  it  is  hereby  enacted  by  the  authority  of  the 
same,  That  from  and  after  the  first  day  of  May  next  all 
estates,  real,  personal,  and  mixed,  of  every  kind  whatsoever, 
passing  from  any  person  who  may  die  seized  and  possessed  of 
such  estate,  being  within  this  commonwealth,  either  by  will  or 
under  the  intestate  laws  thereof,  or  any  part  of  such  estate  or 
estates,  or  interest  therein,  transferred  by  deed,  grant,  bargain 
or  sale,  made  or  intended  to  take  eflfect,  in  possession  or  en- 
joyment, after  the  death  of  the  grantor  or  bargainor,  to  any 
person  or  persons,  or  to  bodies  politic  or  corporate,  in  trust 
or  otherwise,  other  than  to  or  for  the  use  of  father,  mother, 
husband,  wife,  children  and  lineal  descendants  born  in  lawful 
wedlock,  shall  be  and  they  are  hereby  made  subject  to  a  tax 
or  duty  of  two  dollars  and  fifty  cents  on  every  hundred  dollars 
of  the  clear  value  of  such  estate  or  estates,  and  at  and  after 

1  Worthington,  Historical  Sketch  of  the  Finances  of  Pennsylvania, 
p.  87. 

2  Acts  of  1825-26,  chap.  72. 


98  THE  INHERITANCE  TAX  [268 

the  same  rate  for  any  less  amount,  to  be  paid  to  the  use  of  the 
commonweaUli ;  and  all  executors,  and  administrators,  and 
their  sureties,  shall  only  be  discharged  from  liability  for  the 
amount  of  any  and  all  such  duties  on  estates,  the  settlement  of 
which  they  may  be  charged  with,  by  having  paid  the  same  over 
for  the  use  aforesaid,  as  hereinafter  directed:  Provided,  That 
no  estate  which  may  be  valued  at  a  less  sum  than  two  hun- 
dred and  fifty  dollars  shall  be  subject  to  the  duty  or  tax. 

The  tax  was  increased  to  the  present  rate  of  five  per  cent 
in  1846,^  at  a  time  of  great  financial  embarrassment.  After 
1849  ^h^  proceeds  were  applied  to  the  sinking  fund,"  until 
transferred  to  the  general  fund  in  1874.^  In  1849,  ^^^so, 
the  exemptions  were  extended  to  include  daughters-in-law.* 
The  next  j^ear  an  act ''  was  passed  declaring  that  the  words 
"  being  within  this  commonwealth  "  in  the  original  act 
should  be  construed  to  relate  to  persons  as  well  as  to  estates. 
Other  amendments  have  been  passed  from  time  to  time,*'  in 
most  cases  merely  making  administrative  changes,  or  pro- 
viding for  special  cases  not  covered  by  the  original  act. 
The  whole  subject  was  codified  in  1887  by  "  an  act  to 
provide  for  the  better  collection  of  collateral  inheritance 
taxes."  ^  Here  it  was  expressly  provided  that  the  tax 
should  apply  to  all  estates  in  Pennsylvania,  and  to  all  estates 
situated  elsewhere  if  the  owner  was  domiciled  in  Pennsyl- 
vania at  the  time  of  his  death ;  but  this  provision  has  been 
declared  inoperative  in  so  far  as  it  applies  to  real  estate  situ- 
ated outside  of  the  state. ^ 

1  Laws  of  1846,  no.  390,  §  14.  ^  Laws  of  1849,  no.  369. 

3  Laws  of  1874,  no.  60.  *  Laws  of  1849,  no.  369. 

■'"'  Laws  of  1850,  no.  147. 

"Laws  of   1829-30,  no.  98;   1833-34,  no.  52,  §§  62,  69;   1841.  no.  49; 
1846,  no.  300;  May  4th,  1855;  1878,  no.  236;  1895,  no.  243. 
■^  Laws  of  1887,  no.  37;  Brightly's  Purdon's  Digest,  1895,  pp.  305-308. 
'^  Bittinger's  Estate.  129  Pa.  338. 


269]  '^^^^  UNITED  STATES  gg 

Remainders  were  formerly  taxable  at  the  death  of  the 
testator;  but  under  the  revised  law  the  tax  becomes  payable 
when  'the  remainderman  acquires  possession,  and  is  as- 
sessed on  the  value  of  the  property  at  that  time.  But  a  re- 
mainderman may  pay  the  tax  at  any  previous  time,  on  the 
value  of  the  property  after  deducting  tlie  value  of  the  life 
estate.  An  appraiser  is  appointed  by  the  register  of  wills 
whenever  occasion  requires,  from  whose  appraisement  an 
appeal  lies  to  the  orphans'  court.  Executors  and  adminis- 
trators are  directed  to  deduct  the  tax  from  pecuniary  legacies 
passing  through  their  hands,  and  to  collect  the  tax  on  specific 
legacies.  It  is  made  the  duty  both  of  the  personal  repre- 
sentatives and  of  the  heirs  to  give  notice  to  the  register  of 
wills  of  any  real  estate  which  is  liable  to  the  tax. 

The  tax  was  at  first  payable  to  the  county  treasurers,  but 
in  1841,^  to  secure  greater  efficiency,  the  duty  of  collection 
was  transferred  to  the  registers  of  wills.  For  many  years 
the  registers  retained  a  commission  of  five  per  cent,  but  in 
1891  ^  their  compensation  was  fixed  at  five  per  cent  if  the 
receipts  amount  to  less  than  $200,000  a  year,  four  per  cent 
if  they  amount  to  $200,000  and  less  than  $300,000,  and 
three  per  cent  if  they  are  $300,000  or  more.  The  registers 
are  required  to  make  quarterly  returns  and  payments  to 
the  State  Treasury. 

When  the  tax  is  paid  within  three  months  of  the  dece- 
dent's death  there  is  a  discount  of  five  per  cent ;  when  not 
paid  within  a  year  it  bears  interest  at  twelve  per  cent,  unless 
the  nonpayment  is  caused  by  unavoidable  delay  in  the  settle- 
ment of  the  estate,  in  which  case  the  interest  is  only  six 
per  cent,  or  whatever  less  amount  is  realized  from  the  es- 
tate in  the  meantime. 

1  Laws  of  1841,  no.  49,  §  3.  '  Laws  of  1891,  no.  50. 


lOO  THE  INHERITANCE  TAX  [270 

The  exemptions  remain  as  they  were  fixed  by  the  original 
act  of  1826  and  the  amendment  of  1849  exempting  daugh- 
ters-in-law, except  that  in  1905  ^  "  children  of  a  former  hus- 
band or  wife  "  were  exempted,  while  bequests  for  the  care 
of  family  burial  lots  are  also  exempt.^  The  courts  have 
held  that  the  exemptions  do  not  include  a  grandmother,  an 
adopted  child,  or  a  son's  widow  who  has  remarried.^  At- 
tempts to  evade  the  tax  by  the  creation  of  trusts  and  by 
deeds  intended  to  take  effect  after  the  death  of  the  grantor 
have  repeatedly  been  defeated  by  the  courts/ 

The  receipts  from  the  collateral-inheritance  tax  have 
grown  to  more  than  a  million  dollars  annually. 

In  1897  "  the  Pennsylvania  legislature  passed  an  act  im- 
posing a  tax  of  two  per  cent  on  personal  property  passing 
to  the  direct  heirs  exempt  from  the  collateral-inheritance 
tax;  but  an  exemption  of  $5000  led  the  Supreme  Court  of 
the  state  to  declare  the  act  unconstitutional.^  The  Pennsyl- 
vania constitution  declares  that  all  laws  exempting  property 
from  taxation,  other  than  certain  kinds  of  property  specified, 
shall  be  void;  and  the  court  held  that  this  prohibition  ap- 
plied to  the  direct-inheritance  tax.  That  the  same  reason- 
ing has  not  been  applied  to  the  exemption  of  $250  from  the 
collateral-inheritance  tax  seems  to  be  due  to  the  priority  of 
that  exemption  to  the  existing  constitution. 

Besides  the  collateral-inheritance  tax,  Pennsylvania  levies 
a  uniform  tax  of  fifty  cents  on  every  probate  of  a  will  or 

1  Laws  of  1905,  no.  181.  2  l^ws  of  1903,  chap.  13. 

3  McDowell  vs.  Adams,  45  Pa.  430 ;  Comm.  vs.  Nancrede,  32  Pa.  389 ; 
Comm.  vs.  Powell,  51  Pa.  438. 

4  Tritt  vs.  Crotzer,  13  Pa.  451;  Wright's  Appeal,  38  Pa.  507;  Appeal 
of  Dubois,  121  Pa.  368. 

^  Laws  of  1897,  no-  47- 
«  Cope's    Estate,  191   Pa.  i. 


271]  THE  UNITED  STATES  jOI 

grant  of  administration/  as  part  of  the  system  of  taxes 
known  as  taxes  on  offices  and  process,  or  more  commonly  as 
taxes  on  writs,  wills,  and  deeds.  This  is  in  addition  to  the 
fees  of  the  registers,  a  part  of  which  also  goes  into  the 
state  treasury." 

III.  Louisiana 
For  many  years  Louisiana  had  a  ten  per  cent  tax  on  for- 
eign heirs.     In  1828  ^  the  legislature  enacted 

that  any  person  who  is  not  a  citizen  of  the  United  States,  or 
is  not  domiciliated  in  any  part  of  said  states,  shall  be  subject 
to  pay  to  this  state  ten  per  cent,  on  all  sums  which  may  be  due 
to  him  as  an  heir,  legatee  or  donee,  by  any  succession  which 
may  be  opened  in  this  state. 

Personal  representatives  were  instructed  to  retain  the 
amount  of  the  tax  and  pay  it  to  the  Louisiana  officials.  The 
wording  of  the  law  was  changed  in  later  years  *  so  that  it 
read  as  follows : 

Each  and  every  person,  not  being  domiciliated  in  this  State, 
and  not  being  a  citizen  of  any  state  or  territory  in  the  Union, 
who  shall  be  entitled,  whether  as  heir,  legatee  or  donee,  to  the 
whole  or  any  part  of  the  succession  of  a  person  deceased, 
whether  such  person  shall  have  died  in  this  state  or  elsewhere, 
shall  pay  a  tax  of  ten  per  cent,  on  all  sums  or  on  the  value  of 
all  property  which  he  may  actually  receive  from  said  succes- 

1  Laws  of  1829-30,  no.  157,  §  5;  1831-32,  no.  80,  §  2>^;  1878,  no.  227. 
§  8;  Brightly's  Purdon's  Digest,  pp.  1476,  1625. 

2  Laws  of  1831-32,  no.  80,  §  Z7  \  1878,  no.  227,  §§  8.  13;  Brightly's 
Purdon's  Digest,  p.  786. 

3  Acts  of  1828,  no.  95,  §§  I,  2. 

4  Acts  of  1842,  no.  154,  §  4;  185s,  no.  315,  §§  7,  8;  Revised  Civil  Code, 
1870,  arts.  1221-23;  Revised  Statutes,  1870,  §§  13,  11 13,  1470,  13,683. 
13,684;  Voorhies'  Revised  Statutes,  1876,  §§  3345,  3346. 


I02  THE  INHERITANCE  TAX  [272 

sion,  or  so  much  thereof  as  is  situated  in  this  state,  after  de- 
ducting all  debts  due  by  said  succession. 

The  tax  was  assailed  as  unconstitutional  by  a  foreign  heir, 
who  maintained  that  it  was  a  regulation  of  foreign  com- 
merce and  a  tax  upon  exports.  The  United  States  Supreme 
Court  in  1850  denied  that  it  was  either.^  It  was  also 
claimed  to  be  in  conflict  with  the  following  article  of  a  treaty 
concluded  between  the  United  States  and  the  King  of 
Wiirtemberg  in  1844:^ 

The  citizens  or  subjects  of  each  of  the  contracting  parties 
shall  have  power  to  dispose  of  their  personal  property  within 
the  States  of  the  other  by  testament,  donation,  or  otherwise, 
and  their  heirs,  legatees,  and  donees,  being  citizens  or  subjects 
of  the  other  contracting  party,  shall  succeed  to  their  said  per- 
sonal property,  and  may  take  possession  thereof,  either  by 
themselves  or  by  others  acting  for  them,  and  dispose  of  the 
same  at  their  pleasure,  paying  such  duties  only  as  the  inhabi- 
tants of  the  country  where  the  said  property  lies,  shall  be  liable 
to  pay  in  like  cases. 

The  United  States  Supreme  Court  decided  that  this  did 
not  apply  to  the  case  of  a  citizen  or  subject  of  either  coun- 
try residing  at  home  and  disposing  of  property  there  in  favor 
of  a  citizen  or  subject  of  the  other,  and  therefore  did  not 
invalidate  the  Louisiana  tax.^  But  strangely  enough,  the 
Louisiana  courts  held  that  the  tax  was  rendered  inoperative, 
so  far  as  French  heirs  were  concerned,  by  a  treaty  of  1853 
which  provided  that  in  all  the  states  of  the  Union  whose 
laws  permitted  it,  so  long  as  those  laws  should  remain  in 

^  Mager  vs.  Grima,  8  How.  490. 

~  U.  S.  Statutes  at  Large,  viii,  588. 

3  Frederickson  vs.  Louisiana,  23  How.  445. 


273]  -^^-^^  UNITED  STATES  103 

force,  Frenchmen  should  enjoy  the  rights  of  holding  prop- 
erty in  the  same  manner  as  citizens  of  the  United  States, 
and  should  not  be  subjected  to  taxes  on  transfers  or  inherit- 
ance different  from  those  paid  by  American  citizens.^ 

The  tax  was  abolished  in  1877,"  but  was  revived  at  the 
old  rate  in  1894,^  and  the  proceeds  dedicated  to  the  Charity 
Hospital  in  New  Orleans. 

The  new  constitution  of  Louisiana,  adopted  in  1898, 
makes  provision  for  another  kind  of  partial  inheritance  tax 
apparently  designed  mainly  to  discourage  and  compensate  in 
some  degree  for  evasions  of  property  taxes  by  the  well-to- 
do.  It  provides  that  the  legislature  shall  have  power  to 
levy,  for  the  support  of  the  public  schools,  a  tax  upon  all 
inheritances,  legacies,  and  donations,  (except  those  in  the 
direct  line  less  than  $10,000  in  value,  and  bequests  to  edu- 
cational, religious,  or  charitable  institutions)  at  rates  not 
exceeding  three  per  cent  for  the  direct  line  and  ten  per  cent 
in  other  cases;  but  adds  that  the  tax  shall  not  be  enforced 
when  the  property  inherited  or  donated  shall  have  borne  its 
just  proportion  of  taxes  prior  to  the  time  of  such  donation 
or  inheritance.*  After  some  urging  by  Governor  Heard, 
the  Legislature  of  1904  faithfully  carried  into  effect  these 
provisions  of  the  Constitution  by  imposing  such  a  "special 
inheritance  tax  "  at  the  maximum  rates, ^  which  were  re- 
duced at  the  next  session  ^  to  two  per  cent  for  direct  heirs 
and  five  per  cent  for  others.  It  is  the  duty  of  probate  judges 
to  require  satisfactory  proof  that  an  estate  is  not  liable  to 

1  Succession  of  Dufour,  10  La.  An.  391. 

2  Acts  of  1877,  no.  86. 

3  Acts  of  1894,  no.  130. 

*  Constitution  of  Louisiana,  arts.  235,  236. 
s  Acts  of  1904,  no.  45. 
6  Acts  of  1906,  no.  109. 


[04  T^^E  INHERITANCE  TAX  [274 

the  tax  before  placing  the  heirs  in  possession.  In  cases 
where  the  tax  appears  to  be  due,  it  must  be  paid  to  the  tax 
coHector  of  the  parish,  and  the  receipt  presented  to  the 
judge.  It  is  made  the  duty  of  parish  school  superintendents 
(and  of  the  president  of  the  school  board  in  New  Orleans) 
to  see  that  the  act  is  carried  out,  and  they  may  call  on  dis- 
trict attorneys  to  take  legal  proceedings  to  enforce  it.  The 
resultant  funds  are  not  to  be  budgeted  against  till  the  end  of 
the  year,  "  this  being  an  uncertain  and  contingent  source  of 
revenue." 

IV.  Virginia 

As  early  as  1687  "the  settlement  of  estates  in  Virginia  was 
made  the  occasion  of  collecting  an  "  enormous  fee  "  of  two 
hundred  pounds  of  tobacco  and  cask^ — a  uniform  charge  by 
the  Governor  for  impressing  probates  and  letters  of  admin- 
istration with  the  public  seal,  without  which  they  were  in- 
valid. A  much  smaller  probate  fee  was  imposed  in  the  nine- 
teenth century  under  the  name  of  a  tax;  this  was  the  tax 
of  fifty  cents  on  every  "  probat  "  of  a  will  or  grant  of  letters 
of  administration,  introduced  in  1843.'  ^^  was  at  first 
charged  to  the  persons  liable  to  pay  it  by  the  commissioners 
of  the  revenue  in  the  various  counties,  on  information  fur- 
nished by  the  clerks  of  courts ;  but  after  the  first  year  it  was 
collected  by  the  clerks  themselves,  and  no  will  could  be  ad- 
mitted to  "  probat,"  nor  letters  of  administration  granted, 
until  the  tax  had  been  paid.^ 

The  collateral-inheritance  tax  was  first  introduced  in  Vir- 
ginia by  the  acts  of  January  26  and  February  6,    1844.* 

1  Burk,  History  of  Virginia,  ii,  300 ;  Ripley,  Financial  History  of 
Virginia,  p.  97. 

2  Acts  of  1842-43,  chap.  I,  §  6;  chap.  2,  §  9. 

3  Acts  of  1843-44,  chap.  2,  §  2. 

■♦Acts  of  1843-44,  chap.  I,  §  6;  chap.  3. 


275]  '^^^  UNITED  STATES  105 

Estates  valued  at  $250  or  more,  passing  to  persons  other 
than  the  decedent's  father,  mother,  husband,  wife,  brothers, 
sisters,  or  lineal  descendants,  were  subjected  to  the  tax,  at 
rates  to  be  fixed  by  the  legislature  in  the  annual  revenue 
laws.  For  a  number  of  years  the  rate  was  two  per  cent. 
Executors  and  administrators  were  required  to  pay  the  tax 
on  property  passing  through  their  hands,  "  to  the  sheriff  or 
collector  of  the  public  revenue  of  the  proper  county  or  cor- 
poration," before  distributing  the  property.  In  the  case  of 
property  other  than  money  or  real  estate,  and  not  converted 
into  cash  by  the  executor  or  administrator,  the  tax  was  to  be 
paid  on  the  appraised  value  according  to  the  inventory  and 
appraisement  required  by  law.  Clerks  of  court  were  in- 
structed "  diligently  to  enquire  after  and  take  an  account 
of  "  all  devolutions  of  real  estate,  and  to  report  annually  to 
the  commissioners  of  the  revenue  in  each  county,  who  were 
then  to  charge  the  tax  to  the  owners  of  the  property,  in  ad- 
dition to  the  annual  land  tax. 

The  collateral-inheritance  tax  appeared  in  the  Code  of 
1849  ^  i^  ^  slightly  changed  form.  It  was  now  made  ap- 
plicable to  estates  within  the  commonwealth,  without  re- 
gard to  the  decedent's  domicile.  The  language  of  the  ori- 
ginal act  had  been  ambiguous  on  this  point.  Estates  of 
$250  were  now  exempted,  as  well  as  estates  of  less  than  that 
amount.  If  the  personal  representative  failed  to  pay  the 
tax  on  any  estate  before  paying  over  the  estate,  the  law  pre- 
scribed a  penalty  of  ten  per  cent  per  annum  from  the  time 
the  estate  was  paid  over;  and  it  was  deemed  to  have  been 
paid  over  at  the  end  of  one  year  unless  it  appeared  other- 
wise. It  was  made  obligatory  upon  the  personal  representa- 
tive to  take  a  copy  of  a  receipt  for  the  taxes  paid,  and  for 
this  a  fee  of  fifty  cents  was  charged. 

1  Chap.  35,  §§  10,  42;  chap.  39,  §§  6-12;  chap.  40,  §  3- 


Io6  THE  INHERITANCE  TAX  [276 

The  rates  of  two  per  cent  for  the  collateral-inheritance 
tax  and  fifty  cents  for  the  probate  and  administration  duty 
were  continued  in  force  down  to  1852/  In  that  year  the 
probate  and  administration  tax  was  raised  to  seventy-five 
cents."  In  1856  it  was  again  increased,  this  time  to  one 
dollar.^  In  that  year  the  legislature  omitted  to  fix  the  rate 
of  the  collateral-inheritance  tax,  and  this  omission  was  held 
to  operate  as  a  repeal ;  the  chapter  fixing  the  rates  of  taxa- 
tion had  been  repealed  annually,  and  there  could  be  no  tax 
unless  its  amount  or  the  means  of  ascertaining  it  were  pre- 
scribed by  law.* 

The  collateral-inheritance  tax  was  not  again  enacted  until 
i860,  when  a  tax  of  two  per  cent  was  imposed  upon  the 
collateral  devolution  of  real  estate  of  greater  value  than 
$250.^  In  1861,  a  few  weeks  before  the  breaking  out  of  the 
war,  the  tax  was  again  applied  to  all  forms  of  property,  and 
nephews  and  nieces  were  added  to  the  list  of  exempt  suc- 
cessors.*' The  next  year  the  probate  and  administration 
tax,  which  had  remained  at  one  dollar  since  1856,  was  in- 
creased to  $1.50.^  In  1863  the  collateral-inheritance  tax 
was  raised  from  two  to  three  per  cent,  and  the  probate  and 
administration  tax  to  $2.50.^  There  was  a  general  increase 
of  the  rates  of  taxation  at  this  time,  with  the  result  that  at 
the  beginning  of  1864  there  was  a  large  surplus  in  the  treas- 

^Acts  of  1843-44  to  1847-48,  chap,  i,  §§  6,  7;  1848-49,  chap,  i,  §§ 
I,  3;  Code  of  1849,  chap.  40,  §  3. 

2  Acts  of  1852,  chap.  17,  §  16.  3  Acts  of  1855-56,  chap.  9,  §  30. 

*  Fox's  Administrators  vs.  Commonwealth,  16  Grat.  i ;  Acts  of  1852, 
chap.  17,  §  20;  1852-53,  chap.  8,  §  16;  1853-54,  chap.  2,  §  19. 

5  Acts  of  1859-60,  chap.  I,  §§  9,  38;  Code  of  i860,  chap.  35,  §§  9,  38; 
chap.  39,  §§  5-1 1. 

6  Acts  of  1861,  chap.  I,  §  12. 

7  Acts  of  1859-60,  chap.  3,  §  44;  1861,  1861-62,  chap,  i,  §  18. 

8  Acts  of  1863,  chap.  I,  §§  15,  2Z. 


277]  '^^^  UNITED  STATES  107 

ury.  The  ojDeration  of  the  existing  tax  law  was  accord- 
ingly suspended  for  that  year/  In  1865  the  probate  and 
administration  tax  appeared  at  its  old  rate  of  one  dollar,^ 
while  the  collateral-inheritance  tax,  after  being  omitted 
from  a  few  tax  laws,  reappeared  in  1866  ^  at  two  per  cent, 
and  was  increased  in  1867  ^o  four  and  in  1870  to  six  per 
cent."*  In  the  latter  year  also  a  graduated  scale  was  intro- 
duced for  the  probate  and  administration  tax.  The  rate 
was  one  dollar  for  estates  not  exceeding  one  thousand  dol- 
lars and  ten  cents  for  every  additional  hundred  dollars  or 
fraction  thereof,  or  approximately  one-tenth  of  one  per 
cent.^  This  scale  of  rates  remains  in  force  to-day.®  The 
collateral-inheritance  tax  remained  at  six  per  cent  until 
1884,  when  it  was  repealed.^  In  1874,  however,  brothers, 
nephews  and  nieces  were  dropped  from  the  list  of  favored 
relatives.  In  1880  and  1881  the  city  of  Lynchburg  at- 
tempted to  levy  an  additional  tax  on  inheritances,  but  this 
was  held  to  be  unauthorized  by  law.^ 

The  collateral-inheritance  tax  was  reimposed  in  1896  " 
at  the  rate  of  five  per  cent,  the  exempt  relatives  being  the 
decedent's  parents,  grandparents,  husband  or  wife,  brothers 
and  sisters,  and  lineal  descendants.  At  the  following  ses- 
sion ^"^  property  used  exclusively  for  public,  benevolent,  edu- 

1  Acts  of  1863-64,  chap.  I.     -  Acts  of  1864-65,  chap.  39.  §  2>Z- 

3  Acts  of  1865-66,  chap.  I,  §  20;  chap.  3,  §§  3,  18. 

4  Acts  of  1866-67,  chap.  64,  §  3;  1869-70,  chap.  45,  §  18;  chap.  226,  §  3. 

5  Acts  of  1869-70,  chap.  226,  §  13. 

«  Code  of  1904,  §§  579,  590;  Acts  of  1883-84,  chap.  450,  §  12. 

■^  Acts  of  1870-71,  chap.  193,  §  3;  1871-72,  chap.  385,  §  3;  Code  of 
1873,  chap.  Zi,  §  19;  chap.  35.  §  3;  chap.  36,  §  i ;  Acts  of  1874,  chap. 
240,  §§  21,  22;  1874-75,  chap.  206,  §  20;  chap.  239,  §  12;  1875-76,  chap. 
161;  chap.  162,  §  12;  1881-82,  chap.  61;  chap.  119,  §  12;  1883-84,  chaps. 
389.  513-  *^  Schoolfield  vs.   Lynchburg,  78  Va.  366. 

9  Acts  of  1895-96,  chap.  334.        I''  Acts  of  1897-98,  chap.  539. 


I08  THE  INHERITANCE  TAX  [278 

cational,  or  religious  purposes  was  also  exempted,  and  cer- 
tain charitable  and  educational  bequests  made  in  the  mean- 
time were  exempted  by  special  acts.^ 

V.  Maryland 

The  General  Assembly  of  Maryland  established  a  col- 
lateral-inheritance tax  in  1845,^  to  aid  in  paying  the  debts 
of  the  state.  The  only  exemptions  were  those  in  favor  of 
the  decedent's  father,  mother,  wife,  children,  and  lineal  des- 
cendants, and  all  estates  of  less  than  $500 ;  in  all  other  cases 
the  rate  was  two  and  one-half  per  cent.  Executors  and 
administrators  were  directed  to  pay  the  tax  on  devolutions 
of  personal  property  to  the  register  of  wills.  In  the  case 
of  real  estate  the  tax  was  at  first  paid  with  the  general 
property  tax,  according  to  valuations  by  the  levy  courts; 
but  after  the  first  year  the  value  was  determined  by  the  or- 
phans' courts,  and  the  tax  was  paid  to  the  registers  of  wills.^ 

The  collateral-inheritance  tax  was  accompanied  by  a  tax 
of  ten  per  cent  on  the  commissions  allowed  by  the  orphans' 
courts  to  executors  and  administrators ;  and  it  was  expressly 
provided  that  in  fixing  the  commission  no  allowance  was  to 
be  made  for  the  tax,  as  it  was  intended  to  be  paid  out  of  the 
commission,  and  not  out  of  the  estate.*  As  this  tax  is  inci- 
dental to  the  devolution  of  property,  it  may  properly  be  men- 
tioned here.  It  might  be  called  a  death  duty,  though  it  can 
scarcely  be  termed  an  inheritance  tax. 

The  laws  relating  to  these  two  taxes  were  strengthened 
by  numerous  administrative  amendments  during  the  first  five 
years  after  their  adoption/'  and  as  thus  amended  were  em- 

1  Acts  of  1897-98,  chaps.  562,  563.        -  Laws  of  1844-45,  chap.  237. 
3  Laws  of  1845-46,  chap.  202.  *  Laws  of  1844-45,  chap.  184. 

'•Laws  of  1845-46,  chap.  71,  §  3;  chap.  391;  1846-47,  chap.  344;  1847- 
48,  chaps.  222,  230;  1849-50,  chap.  447,  §  4. 


279]  ^^^^  UNITED  STATES  109 

bodied  in  the  Code  of  1860.^  In  1864  there  was  a  general 
reduction  of  taxes.  The  tax  on  executors'  and  administra- 
tors' commissions  was  reduced  to  five  per  cent,  but  was  re- 
stored to  the  original  figure  the  next  year ; "  the  collateral- 
inheritance  tax  was  reduced  to  one  and  one-half  per  cent, 
and  its  original  rate  was  not  restored  until  1874.'''  In  1880 
surviving  husbands  were  added  to  the  list  of  exempt  rela- 
tives, and  the  time  for  the  payment  of  the  tax  on  a  re- 
mainder was  postponed  until  after  the  determination  of  the 
preceding  estate.* 

Both  of  these  taxes  are  now  levied  at  the  original  rates." 
Executors  and  administrators  are  directed  to  pay  the  in- 
heritance tax  on  personal  property  before  paying  any 
legacies  or  distributing  the  shares  of  an  estate;  if  the  pay- 
ment is  not  made  within  thirteen  months  from  the  date 
of  their  administration,  they  forfeit  their  commissions. 
The  estates  subject  to  the  tax  are  valued  by  appraisers  ;  when 
a  life  estate  or  limited  interest  is  created,  the  proportion 
of  the  tax  to  be  paid  by  each  of  the  beneficiaries  is  deter- 
mined by  the  orphans'  court  as  they  become  successively 
entitled.  The  law  contains  no  exemption  in  favor  of  be- 
quests to  charitable  institutions,  but  one  such  bequest  was 
exempted  son:fe  years  ago  by  special  act  of  the  legislature, 
on  the  ground  that  the  institution  was  destitute  of  ready 
money  and  unable  to  pay.''      No  discount  is  allowed  for 

1  P.  G.  L.,  art.  81,  §§  106-114,  124-147.  See  also  Laws  of  1861-62, 
chaps.  18,  157. 

2  Laws  of  1864,  chap.  372;  1865,  chap.  127. 

3  Laws  of  1864,  chap.  200;  1874,  chap.  483,  §  113. 
*  Laws  of  1880,  chaps.  444,  455. 

5  Code  of  1888,  P.  G.  L.,  art.  81,  §§  97-125;  Laws  of  1892,  chap.  473; 
Laws  of  1894,  chap.  493. 

6  Laws  of  1890,  chap.  249. 


no  THE  INHERirANCE  TAX  [280 

prompt  payment.  Payments  are  made  in  all  cases  to  the 
registers  of  wills,  who  are  allowed  to  retain  five  per  cent  of 
both  the  inheritance  tax  and  the  tax  on  commissions,  as 
long  as  their  entire  compensation  from  all  sources  does  not 
exceed  certain  amounts  fixed  by  the  state  constitution.^ 

Executors  and  administrators  pay  the  tax  on  their  com- 
missions at  the  time  of  the  passage  of  their  accounts.  Any 
legacy  left  to  an  executor  by  way  of  compensation  is  reck- 
oned in  the  commission;  and  the  tax  is  payable  whether  the 
commission  allowed  by  the  orphans'  court  is  claimed  by  the 
personal  representative  or  not.  Being  payable  whenever  an 
estate  is  settled,  it  forms  a  considerable  source  of  revenue, 
and  in  some  years  the  receipts  from  this  source  have  ex- 
ceeded those  from  the  collateral-inheritance  tax  itself.  To- 
gether these  two  taxes  pay  about  five  per  cent  of  the  state 
expenses. 

VI.   North  Carolina 

The  General  Assembly  of  North  Carolina,  by  "  an  act 
to  increase  the  public  revenue  "  approved  January  18,  1847,^ 
imposed  an  inheritance  tax  of  one  per  cent  on  all  real  estate 
of  the  value  of  three  hundred  dollars  or  more,  and  personal 
property  of  the  value  of  two  hundred  dollars  and  upwards, 
passing  to  any  person  other  than  the  decedent's  widow  and 
lineal  descendants.  Deeds  of  gift  and  other  conveyances 
made  with  intent  to  defeat  the  purpose  of  the  act  were  de- 
clared void.  At  the  next  session  it  was  made  the  duty  of 
personal  representatives  having  in  their  hands  personal  prop- 
erty liable  to  the  tax  to  apply  to  the  courts  for  the  appoint- 
ment of  appraisers.^ 

The  tax  w^as  graduated  according  to  relationship  in  1855. * 

1  Banks  vs.  State,  60  Md.  305.  -  Laws  of  1846-47,  chap.  72. 

3  Laws  of  1848-49,  chap.  81. 

*  Public  Laws  of  1855,  chap.  37;  Revised  Code,  1855,  chap.  99.  §  7. 


28 1  ]  ^rHE  UNI  TED  ST  A  TES  I  j  i 

On  real  estate  of  the  value  of  three  hundred  dollars  or  per- 
sonal property  of  the  value  of  tw^o  hundred  dollars  going  to 
any  one  person  the  rates  were  made  one  per  cent  fur  broth- 
ers and  sisters,  two  per  cent  for  uncles  and  aunts  and  their 
descendants,  and  three  per  cent  for  more  remote  relatives 
and  strangers.  The  exemptions  were  extended  to  include  the 
decedent's  husband  or  wife,  lineal  descendants  and  ances- 
tors, sons-in-law  and  daughters-in-law.  There  was  no 
exemption  in  favor  of  churches  or  educational  institutions.^ 
A  penalty  of  five  hundred  dollars  was  prescribed  for  at- 
tempting to  divide  or  settle  any  estate  liable  to  the  tax 
without  lawful  administration. 

This  law  remained  unchanged  for  four  years.'  In  1859  ^ 
the  tax  was  made  applicable  to  all  real  and  personal  estate 
above  the  value  of  one  hundred  dollars,  situated  within  the 
state,  the  list  of  exempt  relatives  remaining  substantially 
the  same.  The  rates  of  one,  two,  and  three  per  cent  were 
continued  "*  in  force  until  1865,  when  they  were  doubled.^ 
The  next  year  ®  the  exemption  of  one  hundred  dollars  was 
dropped.  From  this  time  on  '^  there  were  only  two  rates, 
one  for  uncles  and  aunts  and  their  descendants,  and  another 
for  remote  relatives  and  strangers;  the  former  was  dimin- 
ished at  first  to  two  and  then  to  one  per  cent,  and  the  lat- 

1  Barringer  vs.  Cowan,  2  Jones  Eq.  436. 

2  Public  Laws  of  1856-57,  chap.  34. 

3  Public  Laws  of  1858-59,  chap.  25. 

*  Public  Laws  of  1860-61,  chap.  32;  2d  extra  session.  i86r,  chap.  31; 
adjourned  session,  1862-63,  chap.  70. 

5  Public  Laws  of  1864-65,  chap.  27. 

®  Public  Laws  of  1866,  chap.  21. 

''  Public  Laws  of  1866-67,  ciiap.  72;  1868-69,  chap.  108;  1869-70,  chap. 
229;  1870-71,  chap.  227;  1871-72,  chap.  58;  1872-73,  chap.  144;  Battle's 
Revisal,  1873,  chap.  102. 


112  THE  INHERITANCE  TAX  [282 

ter  varied  in  different  years  from  one  to  two  and  one-half 
per  cent.  This  tax  was  discontinued  altogether  by  being 
omitted  from  the  revenue  act  of  1874.^ 

In  1897,"  after  an  interval  of  twenty-three  years,  the  in- 
heritance tax  was  re-established  and  extended  to  direct  heirs. 
The  rates  were  now  fixed  at  two-thirds  of  one  per  cent 
for  the  direct  line,  and  one  and  one-half  per  cent  in  other 
cases,  bequests  for  charitable  uses  excepted. 

In  1 90 1  North  Carolina  not  only  re-enacted  the  inherit- 
ance tax  as  to  personal  property,  but  went  further  in  the 
direction  of  radically  progressive  rates  than  any  other  state 
in  the  Union  had  ever  gone.  Although  alone  among  the 
eastern  states  in  the  adoption  of  the  progressive  principle, 
she  prescribed  the  highest  rates  in  force  anywhere  in  the 
Union.  The  statute  "  plainly  shows  the  influence  of  Federal 
legislation.  Only  the  surviving  husband  or  wife  was 
exempted;  taxable  heirs  were  divided  intO' five  classes,  with 
basic  rates  ranging  from  three-fourths  of  one  per  cent  to 
five  per  cent,  and  a  maximum  rate  of  fifteen  per  cent,  just 
as  in  the  case  of  the  National  inheritance  tax  of  1898.  But 
the  North  Carolina  tax  was  really  heavier  than  its  model, 
because  the  exemption  was  only  $2,000  instead  of  $10,000, 
and  the  basic  rates  were  multiplied  by  i>^,  2,  2^,  or  3  in 
the  case  of  comparatively  small  legacies ;  thus  the  maximum 
rates  were  imposed  upon  legacies  exceeding  $50,000  instead 
of  $1,000,000.  Since  1903,  however,  these  progressive 
rates  have  applied  only  to  very  distant  relatives  and  strang- 
ers in  blood.*  It  is  worthy  of  note  that  the  National  and 
state   taxes   together   would    have   claimed    approximately 

1  Laws  of  1873-74,  chap.  134.         -  Public  Laws  of  1897,  chap.  168. 
3  Public  Laws  of  1901,  chap.  9. 

*  Public  Laws  of  1903,  chap.  247,  §  6 ;  1905,  chap.  588,  §  6 ;  1907, 
chap.  256,  §  6. 


283]  THE  UNITED  STATES  1 1? 

thirty  per  cent  ^  of  the  value  of  a  legacy  exceeding  $1,000,- 
000  going  to  a  distant  relative  or  stranger  in  blood  —  a 
higher  rate  than  is  in  force  in  any  considerable  country  in 
the  world.  But  it  should  be  remembered  that  the  North 
Carolina  tax,  like  the  temporary  Federal  tax  after  which  it 
was  patterned,  applied  only  to  personal  property.  The 
revenue  act  of  1907  seems  to  extend  it  to  real  estate,  but 
the  language  of  the  act  is  not  consistent. 

VII.  Alabama 

The  Alabama  revenue  act  of  1848  "  imposed  a  tax  of  two 
per  cent  on  every  bequest  of  personal  property  and  devise  of 
real  estate  made  in  favor  of  any  person  or  corporation  other 
than  the  testator's  wife,  children,  grandchildren,  brothers 
and  sisters.  At  the  next  session  of  the  legislature  the  list 
of  exempt  relatives  was  increased  by  the  addition  of  the 
husband,  parents,  and  adopted  children,  and  the  tax  was 
made  applicable  to  deeds  of  gift.^ 

Later  enactments  restricted  the  tax  to  legacies,  apparently 
leaving  real  estate  untaxed.  The  rate  was  increased  during 
the  Civil  War,  rising  at  one  time  as  high  as  ten  per  cent.* 
It  was  afterward  reduced  to  one-half  of  one  per  cent  in  cases 
where  letters  testamentary  were  taken  out  in  Alabama,  and 
three  per  cent  in  other  cases. '^  The  tax  was  abolished  in 
1868  by  being  omitted  from  the  annual  revenue  law.*' 

The  new  Constitution  of  Alabama,  adopted  in  1901,  pro- 
vides that  an  inheritance  tax  of  not  more  than  two  and 

^  Not  quite  thirty  per  cent,  because  it  was  the  practice  of  the  Na- 
tional government  to  tax  only  what  remained  after  the  payment  of  the 
state  tax. 

2  Acts  of  1847-48,  no.  I,  §  86.  ^  Acts  of  1849-50,  no.  i.  §  i. 

4  Acts  of  1862,  no.  I,  §§  2,  24;  1864,  nos.  63,  64. 

5  Acts  of  1865-66,  no.  »,  §§  2,  3;  1866-67,  no.  260,  §§  2,  4;  Code  of 
1867,  §§  434.  436. 

6  Acts  of  1868,  no.  I. 


114  THE  INHERITANCE  TAX  [284 

one-half  per  cent  may  be  imposed  upon  heirs  other  than  the 
predecessor's  father,  mother,  husband  or  wife,  brothers  and 
sisters,  children,  and  lineal  descendants;^  but  the  legisla- 
ture seems  not  to  have  availed  itself  of  this  permission. 
Perhaps  it  was  not  deemed  worth  while  to  levy  a  tax  subject 
to  such  unreasonable  restrictions.  Yet  there  would  appear 
to  be  nothing  in  the  constitution  which  would  prevent  in- 
heritance taxes  if  this  absurd  attempt  at  legislation  had  not 
been  inserted. 

VIII.  Delaware 

The  inheritance  tax  was  introduced  in  Delaware  in  1869." 
The  rate  was  at  first  three  per  cent  for  all  collateral  relatives, 
but  in  1871  ^  this  uniform  rate  was  replaced  by  a  relation- 
ship scale  somewhat  similar  to  that  of  the  Federal  tax 
which  had  been  repealed  the  year  before,  except  that  direct 
heirs  were  not  included.     The  rates  were  as  follows : 

Per  cent. 

Brothers  and  sisters  and  their  descendants i 

Uncles  and  aunts  and  their  descendants 2 

Great-uncles  and  great-aunts  and  their  descendants 3 

Other  collateral  relatives  and  strangers 5 

Estates  of  five  hundred  dollars  or  less  were  exempted, 
and  no  tax  was  required  of  the  decedent's  widow.  The  reg- 
isters of  wills  were  allowed  a  commission  of  one-half  of 
one  per  cent  for  receiving  the  payments.  The  tax  was  re- 
pealed in  1883  ■*  except  as  to  strangers  in  blood,  so  that  it 
is  now  of  very  little  importance.     One  portion  of  the  Dela- 

^  Constitution  of  Alabama,  §  219. 

2  Laws  of  Delaware,  vol.  xiii,  chap.  390,  §§  12-22. 

3  Ibid.,  vol.  xiv,  chap.  21. 

*  Ibid.,  vol.  xvii,  chap.  1 1 ;  Revised  Statutes  of  Delazuare,  1893,  pp. 
66-69. 


285]  Tlil^  UNI  TED  S  TA  TES  I  j  ^ 

ware  Tax  Commission  of  1891-93  recommended  that  this 
source  of  revenue  be  turned  over  to  the  counties.'  The  tax 
was  repealed  in  1893,  ^^^^t  the  repealing  act  was  in  turn  re- 
pealed at  the  same  session,  reviving  the  tax." 

IX.  Wisconsin 

A  Wisconsin  law  of  1868,  "  relative  to  the  compensation 
of  county  judges,"  besides  providing  for  the  payment  of 
the  salaries  of  such  judges  out  of  the  county  treasuries,  made 
it  the  duty  of  executors,  administrators,  and  guardians  to 
pay  the  county  treasurers,  for  the  use  and  benefit  of  the 
counties  in  which  the  estates  administered  by  them  were 
situated,  sums  varying  from  twenty  dollars  for  estates  be- 
tween $1,000  and  $2,000  to  seventy-five  dollars  for  estates 
of  more  than  $10,000.  Milwaukee  county  and  a  few  other 
counties  in  which  the  county  courts  had  civil  jurisdiction 
were  excepted  from  the  operation  of  the  act.^  The  law 
was  repealed  in  1872,'*  but  in  1877  the  same  charges  were 
established  in  Milwaukee  county  by  "  an  act  regulating  the 
salary  of  the  county  judge  of  Milwaukee  county."  ^  In 
1889  estates  not  exceeding  $3,000  were  exempted,  and  the 
rates  were  fixed  at  one-half  of  one  per  cent  on  the  first 
$500,000  and  one-tenth  of  one  per  cent  on  the  remainder ; " 
so  that  while  the  charge  was  proportional  in  most  cases, 

1  Report  of  the  Undersigned  Members  [J.  B.  Pennington,  E.  H.  Ban- 
croft, D.  J.  Layton]  of  the  Dclazvarc  Tax  Commission,  p.  15. 

^  Laivs  of  Delaware,  vol.  xix,  chaps.  553,  554. 

3  General  Laws  of  1868,  chap.  121;  Revised  Statutes,  1871,  chap,  ii", 
§§  59-62,  69. 

•*  General  Laws  of  1872,  chap.  40. 

5  Laws  of  1877,  chap.  98;  Revised  Statutes,  1878,  §  2483.  See  also 
Laws  of  1880,  chap.  262. 

8  Laws  of  1889.  chap.  176. 


Il6  THE  INHERITANCE  TAX  [286 

estates  of  more  than  half  a  milHon  dollars  were  treated  more 
tenderly  than  those  of  less  value.  The  title  of  the  new 
act  declared  that  the  charge  it  imposed  was  to  be  "  in  lieu 
of  fees,"  but  the  Wisconsin  Supreme  Court  held  that  such 
an  exaction  could  not  be  a  fee,  nor  in  lieu  of,  nor  equivalent 
to,  a  fee,  but  was  a  tax  imposed  as  a  condition  precedent  to 
the  administration  of  the  estate;  and  as  a  tax  it  was  declared 
unconstitutional  because  it  applied  to  but  one  county.^ 

The  State  Tax  Commission  of  1898  having  recommended 
an  inheritance  tax,  the  legislature  of  1899  "  provided  for 
a  tax  on  inheritances  of  personal  property,  in  the  case  of 
estates  valued  at  $10,000  or  more,  at  one  per  cent  for  di- 
rect heirs  and  brothers  and  sisters  and  five  per  cent  in  other 
cases,  bequests  for  religious,  charitable,  and  educational  pur- 
poses being  exempted.  Among  the  administrative  provis- 
ions was  a  proviso  that  from  the  valuation  of  the  property 
should  be  deducted  an  amount  equal  to  the  fair  valuation  of 
all  personal  property  over  and  above  $10,000  upon  which  a 
personal  property  tax  had  been  paid  the  previous  year;  in 
other  words,  the  tax  was  made  applicable  only  to  personal 
property  which  escaped  assessment  for  the  property  tax. 
The  county  treasurers  were  directed  to  retain  fifteen  per 
cent  of  the  proceeds  for  county  purposes. 

This  act  was  declared  unconstitutional  in  1902  because 
the  exemption  was  based  on  the  value  of  the  entire  estate, 
instead  of  on  the  value  of  the  separate  legacies  or  shares. 
The  State  Supreme  Court  held  that  no  rational  distinction 
could  be  drawn  between  two  legatees  simply  because  the 
estates  from  which  their  legacies  came  were  of  different 
sizes.  ^ 

1  State  vs.  Mann,  76  Wis.  469;  45  N.  W.  526. 

2  Laws  of  1899,  chap.  355. 

3  Black  vs.  State,  113  Wis.  205;  89  N.  W.  522. 


287]  THE  UNITED  STATES  H^ 

The  Icg-islatiire  of  1903  promptly  passed  a  new  act  ^ 
avoiding  the  defect  pointed  out  by  the  court  and  providing 
for  a  tax  elaborately  graduated  both  according  to  relation- 
ship and  according  to  the  amount  of  the  inheritance,  the 
exemption  allowed  also  varying  with  the  relationship.  The 
tax  applies  only  to  the  excess  above  the  exempt  amount  in 
each  case,  and  the  higher  rates  in  the  progressive  scale  apply 
only  to  the  excess  above  the  amounts  taxable  at  the  next 
lower  rates.  Primary  rates  ranging  from  one  per  cent  to 
five  per  cent  having  been  fixed  according  to  relationship  for 
inheritances  not  exceeding  $25,000,  these  rates  are  multi- 
plied by  one  and  one-half,  two,  two  and  one-half,  and  three 
for  the  excess  above  $25,000,  $50,000,  $100,000  and  $500,- 
000  respectively,  as  shown  in  the  following  table: 


Widow 

Husband,  direct  heirs    . . 

Brothers  and  sisters  and 
their  descendants,  sons- 
in-law,  daughters-in- 
law  

Uncles  and  aunts  and 
their  descendants 

Great-uncles  and  great- 
aunts  and  their  de- 
scendants   

■  All  others 


Exemp- 
tion. 


^10,000 
2,000 


150 
100 


Not  ex- 
ceeding 
$25,000. 


Per  cent. 


$25,000- 
$50,000. 


Per  cent. 

6 
1% 


$50,000- 
$100,000. 


Per  cent. 


$100,000- 
$500,000. 


Per  cent. 
1% 


Excess 

above 

$500,000. 


Per  cent. 
3 

9 


Bequests  to  corporations  organized  under  the  laws  of 
Wisconsin  solely  for  religious,  charitable,  or  educational 
purposes  are  exempt,  as  also  are  bequests  to  counties  and 
municipalities   for  public  purposes.^ 


1  Laws  of  1903,  chap.  44. 


2  Laws  of  1905,  chap.  96. 


Il8  THE  INHERITANCE  TAX  [288 

When  the  tax  is  paid  within  one  year  from  the  time  of 
the  transfer  a  discount  of  five  per  cent  is  allowed;  when  it 
is  not  paid  within  eighteen  months  interest  is  charged  from 
the  time  of  the  transfer.  Payment  is  required  to  be  made 
to  the  county  treasurers,  who  pay  the  receipts  into  the  state 
treasury  quarterly,  retaining  for  county  use  five  per  cent  of 
the  first  $50,000  paid  each  year,  three  per  cent  of  the  next 
$50,000,  and  two  per  cent  of  all  additional  sums. 

X.  Minnesota 
"An  act  to  fix  the  compensation  of  judges  of  probate 
and  provide  a  fund  for  the  payment  of  the  same,"  passed  by 
the  Minnesota  legislature  in  1875,^  contained  the  following 
provision : 

For  the  purpose  of  reimbursing  the  county  treasury  for  the 
salaries  provided  to  be  paid  in  this  act  to  the  judge  of  probate, 
it  shall  be  the  duty  of  each  executor,  administrator  or  guar- 
dian to  pay  or  cause  to  be  paid  to  the  county  treasurer  for  the 
use  and  benefit  of  the  county  in  whose  probate  court  proceed- 
ings are  to  be  instituted  to  settle  the  estate  of  any  deceased 
person,  the  following  sums,  according  to  the  value  of  the 
estate  and  property  of  such  deceased  person,  as  shown  by  the 
inventory  and  appraisal,  that  is  to  say : 

$10  when  such  value  shall  exceed  $1,000,  and  shall  not  exceed  $5,000; 
$20  when  such  value  shall  exceed  $S,ooo,  and  shall  not  exceed  $10,000 ; 
$30  when  such  value  shall  exceed  $10,000,  and  shall  not  exceed  $15,000; 
$50  when  such  value  shall  exceed  $15,000,  and  shall  not  exceed  $20,000 ; 
And  seventy-five  dollars  in  all  cases  where  the  value  of  the  estate  shall 
exceed  the  sum  of  $20,000;  and  in  addition  all  sums  necessarily  ex- 
pended in  serving  or  publishing  notices  required  by  law. 

It  was  provided  that  no  proceedings  should  be  had  in  any 
cause  for  the  settlement  of  an  estate,  subsequent  to  the  re- 

1  General  Laws  of  1875,  chap.  2)7 '■>  General  Statutes  of  Minnesota, 
1878,  chap.  7,  §§  8,  9. 


289]  THE  UNITED  STATES  I IC; 

turn  of  the  inventory,  until  after  the  payment  of  the  pre- 
scribed charges. 

In  1885  ^  the  exemption  was  increased  to  $2,000  and  the 
following  scale  of  charges  established : 

$  10  when  the  value  shall  exceed  $  2,000  and  shall  not  exceed  $  5,000 

25  when  the  value  shall  exceed      5,000  and  shall  not  exceed     10,000 

35  when  the  value  shall  exceed     10,000  and  shall  not  exceed     15,000 

50  when  the  value  shall  exceed     15,000  and  shall  not  exceed    20,000 

75  when  the  value  shall  exceed    20,000  and  shall  not  exceed    35,000 

100  when  the  value  shall  exceed    35,000  and  shall  not  exceed    50,000 

200  when  the  value  shall  exceed    50,000  and  shall  not  exceed    75.000 

300  when  the  value  shall  exceed    75,000  and  shall  not  exceed  100,000 

500  when  the  value  shall  exceed  100,000  and  shall  not  exceed  150,000 

800  when  the  value  shall  exceed  150,000  and  shall  not  exceed  200,000 

1,000  when  the  value  shall  exceed  200,000  and  shall  not  exceed  500,000 

5,000  when  the  value  shall  exceed  500,000. 

It  will  be  noticed  almost  at  a  glance  that  the  scale  was 
clumsily  contrived.  A  classified  scale  with  a  uniform 
charge  for  each  class  is  unequal  enough  at  best;  but  in  this 
case  the  figures  appear  to  have  been  thrown  together  at  ran- 
dom, without  regard  to  whether  the  scale  was  to  be  in  its 
general  effect  proportional,  progressive,  or  regressive.  Tak- 
ing either  the  maximum  or  minimum  column,  or  the  mean 
between  them,  the  percentages  change  from  progressive  to 
regressive  and  back  again  a  surprising  number  of  times; 
and  when  the  half-million  mark  is  reached  there  is  a  sudden 
jump  from  one-fifth  of  one  per  cent  to  one  per  cent.  It  is 
not  surprising,  therefore,  that  the  Supreme  Court  of  Min- 
nesota decided  that  the  act  violated  the  constitutional  re- 
quirement that  all  taxes  must  be  "  as  nearly  equal  as  may 
be."  The  charges  it  imposed  wxre  held  to  be  taxes,  and  not 
fees ;  and  the  rule  of  equality  was  held  to  be  violated  both 
by  the  $2,000  exemption  and  by  the  arbitrary  schedule." 

1  General   Laws   of    18S5,   chap.    103;    General  Statutes,    Suf>plc»ient. 
1888,  chap.  7,  §  8. 

2  State  z's.  Gorman,  40  Minn.  232;  41  N.  W.  948.     See  p.  156,  infra. 


[20  THE  INHERITANCE  TAX  [090 

But  the  taxation  of  inheritances  in  Minnesota  was  not 
destined  to  be  permanently  prevented  by  this  decision.  A 
number  of  inheritance-tax  bills  were  introduced  at  the 
legislative  session  of  1893;  they  were  strenuously  opposed 
by  the  Minneapolis  Board  of  Trade,  but  one  of  them  became 
law  by  the  act  of  April  18,  which  proposed  a  constitutional 
amendment  authorizing  a  tax,  either  proportional  or  pro- 
gressive, but  not  exceeding  5  per  cent,  on  inheritances  above 
a  fixed  amount.  This  amendment  ^  was  adopted  by  the 
people  at  the  election  of  the  following  year  by  a  vote  of 
108,332  to  41,242;  and  it  first  bore  fruit  in  1897"  '^^  ^ 
statute  taxing  collateral  inheritances  of  personal  property 
5  per  cent,  with  an  exemption  of  amounts  under  $5000,  and 
direct  inheritances  of  personal  property  one  per  cent,  all 
amounts  under  $10,000  being  exempt.  Persons  and  cor- 
porations exempt  by  law  from  taxation  on  real  and  personal 
property  were  exempted  also  from  the  inheritance  tax;  and 
brothers  and  sisters  were  included  among  the  heirs  to  whom 
the  lower  rate  and  higher  exemption  were  to  apply. 

This  act  was  based  more  upon  the  terms  of  the  New 
York  law  than  upon  the  provisions  of  the  constitutional 
amendment,  and  the  result  was  that  it  was  held  not  to  con- 
form to  the  requirements  of  the  latter.  The  amendment, 
which  was  in  the  form  of  a  proviso  added  to  the  section  en- 
joining equality  of  taxation,  was  couched  in  the  following 
terms : 

And  provided  further,  that  there  may  be  by  law  levied  and 
collected  a  tax  upon  all  inheritances,  devises,  bequests,  legacies, 
and  gifts  of  every  kind  and  description  above  a  fixed  and  speci- 
fied  sum,   of  any  and  all   natural   persons  and  corporations. 

1  General  Laws  of  1893,  chap,  i ;  General  Laws  of  189S,  p.  3. 

2  General  Laws  of  1897,  chap.  293. 


291]  THE  UNITED  STATES  12 1 

Such  tax  above  such  exempted  sum  may  be  uniform,  or  it 
may  be  graded  or  progressive,  but  shall  not  exceed  a  max- 
imum tax  of  five  per  cent. 

The  Supreme  Court  of  the  state  pointed  out  four  particu- 
lars in  which  the  statute  violated  the  requirements  of  the 
amendment.  The  act  was  declared  unconstitutional  (i) 
because  it  allowed  a  larger  exemption  to  lineal  than  to  col- 
lateral heirs,  while  the  amendment  authorized  only  one  uni- 
form exemption;  (2)  because  it  attempted  to  tax  the  entire 
inheritance,  and  not  merely  the  excess  above  the  exempt 
amount;  (3)  because  it  exempted  persons  and  corporations 
exempt  from  taxation  on  their  property,  and  so  did  not 
apply  to  "  all  inheritances  "  of  "  all  natural  persons  and 
corporations;"  (4)  because  it  applied  only  to  personal  prop- 
erty.^ 

The  legislature's  next  effort,  in  1901,"  avoided  just  one- 
half  of  the  constitutional  objections  to  the  law  of  1897. 
The  rates  prescribed  were  the  same,  and  seem  to  have  been 
intended  to  apply  to  both  real  and  personal  property;  but 
a  section  carelessly  copied  from  the  former  law  had  the 
effect  of  restricting  the  tax  to  personal  property  as  before. 
The  exemption  was  $500  for  direct  and  collateral  heirs 
alike;  in  the  case  of  collateral  heirs,  however,  the  tax  was 
made  applicable  to  the  entire  inheritance  instead  of  only 
to  the  excess  above  the  amount  of  the  exemption.  It  natur- 
ally followed  that  this  act  was  declared  unconstitutional  on 
two  counts.^ 

The  next  year  the  legislature  in  special  session  passed  an- 
other inheritance-tax  act  *  which  was  even  more  plainly  un- 

iDrew  vs.  Tifift,  79  Minn.  175. 

2  General  Laws  of  1901,  chap.  255. 

3  State  ex  rel.  Frye  vs.  Bazille,  87  Minn.  500. 
*  General  Laws  of  1902,  chap.  3. 


122  THE  INHERITANCE  TAX  [292 

constitutional,  in  that  the  rate  prescribed  for  collateral  heirs 
was  ten  per  cent.  The  rate  for  direct  heirs  was  only  one- 
half  of  one  per  cent,  and  there  was  an  exemption  of  $10,000 
in  all  cases.     The  act  was  of  course  declared  invalid.^ 

In  recommending  the  taxation  of  inheritances  to  the 
legislature  of  1905,  Governor  Johnson  referred  to  the  un- 
successful efforts  of  previous  legislatures,  and  suggested 
that,  the  defects  having  been  pointed  out  by  the  Supreme 
Court,  it  should  be  possible  to  pass  an  act  which  would  be 
approved.  This  suggestion  bore  fruit  in  an  act '  which 
differs  from  most  inheritance-tax  laws  in  making  no  dis- 
tinction between  different  classes  of  relatives,  graduat- 
ing the  rates  of  taxation  solely  according  to  the  amount  in- 
herited. Heirs  of  every  degree  are  required  to  pay,  on  the 
excess  above  $10,000  inherited  by  each,  one  and  one-half 
per  cent  up  to  $50,000,  three  per  cent  on  amounts  of  $50,000 
or  over  and  less  than  $100,000,  and  live  per  cent  on  amounts 
of  $100,000  or  more.  The  tax  applies  at  the  same  rates 
to  all  gifts  exceeding  $10,000  in  value.  In  the  case  of  a 
gift  the  tax  is  payable  directly  to  the  State  Treasurer;  in 
other  cases  it  is  payable  to  the  treasurer  of  the  county  in 
which  the  probate  court  having  jurisdiction  is  located,  but 
is  credited  to  the  state  revenue  fund. 

This  fifth  attempt  of  the  legislature  (the  fourth  under 
the  constitutional  amendment  of  1894)  has  been  sustained 
by  the  Supreme  Court  of  the  state."  The  act  contains  some 
ambiguities  and  evident  errors  of  language  nearly  sufficient 
to  invalidate  it,  but  the  court  was  able  to  discern  the  intent 
of  the  legislature  through  the  imperfections  of  the  statute, 
and  corrected  the  most  glaring  errors  by  construction. 

1  State  ex  rcl  Russell  vs.  Harvey,  90  Minn.  180. 

2  General  Laws  of  1905,  chap.  288. 

3  State  ex  rel.  Foot  vs.  Bazille,  97  Minn.  11. 


293]  -^-^^  UNITED  STATES  123 

The  constitutional  provisions  which  have  given  so  much 
trouble  have  been  repealed  by  an  amendment  ^  adopted  at 
the  last  general  election,  which  greatly  increases  the  power 
of  the  legislature  over  taxation,  and  has  been  interpreted  by 
the  Attorney-General  as  making  its  power  to  impose  in- 
heritance taxes  unlimited. 

XL  New  Hampshire 
In  1878  the  New  Hampshire  legislature,  on  the  recom- 
mendation of  the  State  Tax  Commission,  imposed  a  col- 
lateral-inheritance tax  of  one  per  cent,  "  to  defray  the  cost 
of  probate  courts,"  as  the  title  of  the  act "  declared.  It 
was  provided  that 

All  estates  settled  in  the  probate  courts  of  this  State,  and  all 
transfers  of  property  from  the  dead  to  the  living,  by  gift,  be- 
quest, or  devise,  and  every  succession  made  under  the  laws  of 
this  State,  regulating  the  distribution  of  intestate  estates,  ex- 
clusive of  the  just  indebtedness  of  each  and  all  of  said  estates, 
shall  pay  one  per  cent  on  the  value  of  said  estates,  to  be  de- 
ducted from  each  gift,  bequest,  or  distributive  share,  by  the 
administrator  or  executor,  so  that  each  gift,  bequest,  or  dis- 
tributive share  shall  pay  its  proportional  rate. 

Exemptions  were  made  in  favor  of  husband,  wife,  chil- 
dren, and  grandchildren.  The  law  was  similar  in  many  re- 
spects to  the  federal  legacy  and  succession  tax  statutes.  The 
tax  was  made  payable  to  the  registers  of  probate,  who  were 
required  to  make  quarterly  returns  and  payments  to  the 
State  Treasurer. 

This  form  of  taxation  was  declared  unconstitutional  by 
the  Supreme  Court  of  New  Hampshire  in  1882.^    The  next 

1  Proposed  by  Laws  of  1905.  chap.  168. 

-Laws  of  1878,  chap.  74;  General  Lazvs  of  Neic  Hampshire,  1878. 
chap.  64. 

3  Curry  vs.  Spencer,  61  N.  H.  624.     See  p.  157,  infra. 


124  ^^^^  INHERITANCE  TAX  [294 

year  the  legislature  formally  repealed  the  statute  and  pro- 
vided that  the  amounts  which  had  been  paid  in  should  be 
refunded  on  presentation  of  the  receipts.^ 

One  of  the  constitutional  amendments  adopted  by  New 
Hampshire  in  1903  extended  the  permissible  objects  of 
taxation  to  include  franchises  and  "  property  when  passing 
by  will  or  inheritance."  Governor  McLane,  in  calling  the 
legislature's  attention  to  these  two  new  available  sources  of 
revenue,  expressed  the  opinion  that  a  tax  on  inheritances 
would  produce  considerable  revenue  without  injustice  to 
any  one.  The  legislature  however,  in  imposing  such  a  tax 
in  1905,^  seriously  restricted  its  revenue-producing  power 
by  wholly  exempting  direct  heirs  and  brothers  and  sisters, 
as  well  as  charitable,  educational,  and  religious  institutions, 
and  municipalities.  In  all  other  cases  the  rate  of  taxation 
is  uniformly  five  per  cent,  apparently  without  any  exemp- 
tion of  small  amounts. 

XII.  Illinois 

An  act  passed  by  the  Illinois  legislature  in  1887,^  for  the 
purpose  of  making  the  Cook  County  probate  court  self- 
sustaining,  provided  for  a  considerable  increase  in  the  usual 
fees,  and  in  addition  prescribed  that  every  applicant  for  a 
grant  of  letters  testamentary,  of  administration,  guardian- 
ship, or  conservatorship  by  that  court  should  state  in  the 
petition  the  value  of  the  estate,  real  and  personal,  and  that 
on  the  grant  of  the  letters  a  docket  fee  should  be  paid  ac- 
cording to  the  following  schedule : 

iLaws  of  1883,  chaps.  50,  75. 

2  Laws  of  1905,  chap.  40;  amended  by  Laws  of  1907,  chaps.  64.  68, 
69,  82,  86,  and  138. 

3  Laws  of  1887,  p.  183. 


295]  '^^^^  UNITED  STATES  1 25 

When  the  estate  does  not  exceed  $S,ooo $     5 

When  the  estate  exceeds    $5,000  and  does  not  exceed     $20.000. .  10 

When  the  estate  exceeds     20.000  and  does  not  exceed       50,000. .  20 

When  the  estate  exceeds     50,000  and  does  not  exceed      100,000..  50 

When  the  estate  exceeds  100,000  and  does  not  exceed     300,000. .  100 

When  the  estate  exceeds  300,000  and  does  not  exceed  1,000,000. .  250 

When  the  estate  amounts  to  $1,000,000  and  upwards 1,000 

In  1891  ^  the  scale  was  at  once  ecjualized  and  simplified 
by  making  the  charge  for  estates  of  more  than  $5,000  one 
dollar  for  every  $1,000  of  the  estate,  or  about  one-tenth  of 
one  per  cent;  the  charge  for  estates  of  $5,000  and  less  re- 
maining as  before.  When  the  deceased  leaves  a  widow 
or  children  residing  in  Illinois,  and  the  entire  estate  does 
not  exceed  $2,000,  the  probate  judge  is  instructed  to  remit 
the  fee;  and  he  may  in  his  discretion  suspend,  modify,  or 
remit  the  fee  in  any  case  where  the  estate  does  not  exceed 
$500. 

In  1895 "  Illinois  adopted  a  progressive  inheritance  tax ;  but 
the  progressive  rates  were  not  applied  to  direct  heirs,  but 
only  to  distant  relatives  and  strangers  in  blood,  though  the 
nearer  relatives  were  favored  with  generous  exemptions 
which  really  had  the  effect  of  introducing  progression.  The 
rates  prescribed  by  this  law  were: 

For  the  decedent's  father,  mother,  husband,  wife,  child,  or  other 
lineal  descendant,  brother,  sister,  wife  or  widow  of  a  son,  husband  of 
a  daughter,  or  adopted  child,  i  per  cent  on  the  excess  above  $20,000 
received  by  each  person. 

For  the  decedent's  uncle,  aunt,  niece,  nephew,  or  lineal  descendants 
of  the  same,  2  per  cent  on  the  excess  above  $2,000  received  by  each 
person. 

In  all  other  cases  (estates  of  less  than  $500  being  exempt)  — 

On  all  estates  of  $10,000  and  less 3  per  cent. 

On  all  estates  of  over  $10,000  and  not  exceeding  $20,000  ...  4  per  cent. 
On  all  estates  of  over  $20,000  and  not  exceeding  $50,000  ...  5  per  cent. 
On  all  estates  of  over  $50,000 6  per  cent. 

1  Laws  of  1891,  p.  137.  2  Laws  of  1895,  p.  301. 


126  THE  INHERITANCE  TAX  [296 

The  validity  of  this  act  under  the  Illinois  and  United 
States  constitutions  was  soon  brought  in  question,  at  first 
with  varying-  results;  l)ut  the  decisions  of  the  higher  courts, 
state  and  federal,  were  uniformly  favorable  to  the  act.  The 
question  was  carried  to  the  United  States  Supreme  Court, 
which  decided  in  April,  1898,  that  the  progressive  scale  and 
generous  exemptions  were  not  in  violation  of  the  Four- 
teenth Amendment/ 

The  Illinois  law  of  1895  has  remained  in  force,  with 
comparatively  few  amendments;  but  in  1901  "  bequests  to 
hospitals  or  for  charitable,  religious,  educational,  and  scien- 
tific purposes  were  exempted,  and  the  compensation  of  ap- 
praisers was  increased  from  three  dollars  to  a  possible  maxi- 
mum of  ten  dollars  a  day,  in  the  discretion  of  the  county 
judges.^ 

XIII.   New  York 

The  New  York  inheritance  tax  was  first  imposed  in  1885,^ 
but  amendments  of  greater  or  less  importance  have  been 
made  at  nearly  every  subsequent  session  of  the  legislature. 
The  original  act  provided  for  a  tax  of  five  per  cent  on  col- 
lateral inheritances,  classing  brothers  and  sisters  with  the 
exempt  relatives.  This  was  supplemented  in  1891  *  by  a 
tax  of  one  per  cent  on  direct  inheritances  of  personal  prop- 
erty of  the  value  of  $10,000  or  more;  and  finally,  in  1903  ^ 
this  direct-inheritance  tax  was  extended  to  apply  to  real 
estate  also.  The  latest  complete  revision  of  the  law  was 
passed  in  1905,"  but  it  left  the  main  features  the  same  as 

^  Magoun  vs.  Trust  and  Savings  Bank,  170  U.  S.  283.  See  p.  175. 
infra. 

2  Laws  of  1901,  p.  269.  3  Laws  of  1885,  chap.  483. 

*  Laws  of  1891,  chap.  215.  ^  Laws  of  1903,  chap.  41. 

8  Laws  of  1905,  chap.  368. 


297]  ^^^^  UNITED  STATES  1 27 

before;  namely,  a  tax  of  one  per  cent  on  estates  of  the 
value  of  $10,000  or  more  passing  to  the  decedent's  parents, 
husband  or  wife,  children  and  lineal  descendants  born  in 
lawful  wedlock,  brothers  and  sisters,  sons-in-law  and  daugh- 
ters-in-law, and  adopted  children,  and  a  tax  of  five  per 
cent  in  other  cases  wdierever  the  estate  is  worth  five  hun- 
dred dollars  or  more.  The  one  per  cent  class  includes  not 
only  legally  adopted  children,  but  also  any  orphan  to  whom 
the  decedent  stood  continuously  for  ten  years  in  the  mutually 
acknowledged  relation  of  a  parent,  provided  such  relation- 
ship began  at  or  before  tlie  child's  fifteentli  birthday/  Be- 
quests to  bishops  or  to  religious,  educational,  charitable, 
missionary,  benevolent,  hospital  or  infirmary  corporations, 
including  those  organized  for  Bible  or  tract  purposes,  or  to 
other  corporations  exempt  from  taxation  on  real  or  personal 
property,  are  exempt ;  as  are  also  bequests  of  personal  prop- 
erty other  than  money  or  securities  to  corporations  or  as- 
sociations organized  exclusively  for  the  moral  or  mental 
improvement  of  men  or  women,  or  for  scientific,  literary, 
library,  patriotic,  cemetery,  or  historical  purposes,  or  for 
the  enforcement  of  laws  relating  to  children  or  animals,  and 
not  for  pecuniary  profit.  The  exemption  has  been  held  not 
to  apply  tO'  foreign  corporations." 

If  the  tax  is  paid  within  six  months  from  the  decedent's 
death,  a  discount  of  five  per  cent  is  allowed ;  if  it  is  not  paid 
within  eighteen  months,  interest  is  charged  at  the  rate  of 
ten  per  cent  from  the  time  of  the  decedent's  death,  except 
that  when  there  is  an  unavoidable  delay  in  the  determination 
of  the  tax  the  rate  of  interest  is  only  six  per  cent  until  the 
cause  of  delay  is  removed. 

The  inheritance  tax  has  become  one  of  the  state's  most 
important  sources  of  revenue ;  and  together  with  the  taxes 

1  Step-children  were  added  to  this  class  in  1907  (chap.  204). 

2  Matter  of  Prime,  49  N.  Y.  St.  Rep.  658;  136  N.  Y.  347. 


128  THE  INHERITANCE  TAX  [298 

on  corporations,  stock  transfers,  and  the  liquor  traffic  it 
has  resulted  in  a  very  marked  reduction  in  the  state  prop- 
erty tax,  which  now  amounts  to  only  about  $1,400,000 
3''early.  The  inheritance  tax  averages  nearly  $5,000,000 
a  year,  and  it  is  not  unusual  for  a  single  estate  to  yield  sev- 
eral hundred  thousand  dollars. 

So  successful  has  the  inheritance  tax  been  as  a  revenue- 
producer  that  the  state  fiscal  officers  and  tax  commissions 
have  repeatedly  recommended  making  it  a  still  more  im- 
portant source  of  revenue  by  increasing  the  rates  on  large 
estates.  A  recommendation  of  this  kind  made  by  Comp- 
troller Roberts  in  1897  ^  led  to  the  passage  by  the  legisla- 
ture of  a  progressive  inheritance-tax  bill  providing  for 
rates  as  high  as  fifteen  per  cent  on  estates  of  more  than 
$3,000,000  going  to  collateral  heirs,  and  ten  per  cent  on 
estates  exceeding  $4,000,000  passing  to  direct  heirs.  The 
bill  passed  the  lower  house  by  unanimous  vote,  but  failed 
to  receive  the  Governor's  signature.  Mr.  William  D. 
Guthrie  was  retained  to  appear  before  the  Governor  in  op- 
position to  the  bill,  and  he  argued  against  the  progressive 
tax  on  both  constitutional  and  politico-economic  grounds." 
Instead  of  formally  vetoing  the  bill.  Governor  Black  per- 
mitted it  to  expire  without  his  signature;  but  he  filed  with  it 
an  elaborate  memorandum,  based  largely  upon  Mr.  Guthrie's 
address,  giving  his  reasons  for  not  signing  it.  These  rea- 
sons were  that  additional  revenue  was  not  needed;  that  if 
personal  property  escaped  taxation  it  was  the  fault  of  pub- 
lic officials  and  not  of  the  law ;  that  a  heavy  inheritance  tax 
might  cause  hardship  in  the  case  of  deaths  in  quick  succes- 
sion in  the  same  family;  that  it  would  drive  away  capital; 

'^Annual  Report  of  the  ComptroUer,  January,  1897,  pp.  18-29. 
-Argument  of  William  D.  Guthrie  .  .  .  in  opposition  to  the  Dudley 
Bill  Imposing  a  Graduated  Inheritance  or  Transfer  Tax,  N.  Y.,  1897. 


299]  '^-^^  UNITED  STATES  1 29 

and  above  all,  that  the  rates  proposed  in  the  bill  were  not 
uniform  nor  fair.  These  arg-nments  have  not  appeared 
convincing  to  the  tax  commission  which  reported  cluring 
the  last  session  of  the  legislature,  for  it  recommended  a  pro- 
gressive inheritance  tax  with  a  maximum  rate  of  twenty- 
five  per  cent. 

XIV.  West  Virginia 

A  collateral-inheritance  tax  was  adopted  by  West  Vir- 
ginia in  1887.^  The  rate  was  made  two  and  one-half  per 
cent,  as  in  Maryland,  and  the  Maryland  law  was  closely 
followed  throughout ;  but  the  exemption  was  extended  to 
all  estates  of  less  than  $1,000,  and  the  clerks  of  the  county 
courts,  to  whom  the  tax  was  made  payable,  were  allowed 
only  two  per  cent  commission  instead  of  five.  The  only 
persons  exempted  by  the  original  act  were  the  decedent's 
father,  mother,  wife,  children,  and  lineal  descendants;  but 
in   1891  "  the  surviving  husband  was  added  to  the  list. 

In  1904  the  collateral-inheritance  tax  was  elaborated  ^ 
by  distinguishing  three  classes  of  taxable  relatives.  In 
place  of  the  former  uniform  rate  of  two  and  a  half  per  cent, 
the  decedent's  brothers  and  sisters  now  pay  three  per  cent, 
his  grandparents  five  per  cent,  and  more  distant  relatives 
and  strangers  seven  and  a  half  per  cent.  Bequests  for  pub- 
lic purposes  are  exempt ;  but  the  former  exemption  of  estates 
of  less  than  $1000  is  omitted  from  the  new  law.  The  ad- 
ministrative provisions  were  also  much  changed  and  elabor- 
ated. The  tax  is  now  payable  into  the  state  treasury  on  the  as- 
sessment of  the  State  Tax  Commissioner,  to  whom  quarterly 
reports  are  made  by  the  clerks  of  the  county  courts.  Double 
taxation  by  conflicting  jurisdictions  is  avoided  by  reciprocal 

1  Acts  of  1887,  chap.  31 ;  Code  of  1891,  chap.  32,   §  sia. 

2  Acts  of  1891,  chap.  116.  3  Acts  of  1904,  chap.  6. 


X30  THE  INHERITANCE  TAX  [300 

provisions.  The  receipts,  which  were  insignificant  under 
the  original  law,  have  been  increased  many  fold  by  the 
higher  rates  and  better  administrative  provisions  of  the 
act  of  1904.  The  legislature  of  1907  still  further  increased 
the  importance  of  the  tax  by  extending  it  to  direct  heirs, 
the  rate  in  their  case  being  one  per  cent/ 

XV.   Connecticut 

The  Connecticut  Tax  Commission  of  1887  reported  in 
favor  of  an  inheritance  tax,^  and  the  proposal  was  adopted 
with  some  modification  in  1889.^  All  property  within  the 
jurisdiction  of  the  state,  whether  tangible  or  intangible, 
passing  to  persons  other  than  the  decedent's  father,  mother, 
husband  or  wife,  lineal  descendants,  adopted  children  and 
their  descendants,  sons-in-law  and  daughters-in-law,  ex- 
cept bequests  for  charitable,  benevolent,  educational,  relig- 
ious, or  strictly  public  purposes,  was  made  subject  to  a 
tax  of  five  per  cent  of  its  value  above  the  sum  of  $1,000. 

During  the  legislative  session  of  1893  there  was  some 
agitation  for  the  repeal  of  the  tax,  and  various  modifications 
were  also  proposed,  among  them  being  exemptions  of  real 
estate  in  favor  of  the  nearer  collateral  relatives,  and  of  the 
second  devolution  of  property  within  a  year;  but  the  only 
amendment  adopted  was  one  *  adding  brothers  and  sisters 
to  the  list  of  exempt  relatives.  The  legislature  of  1897 
imposed  a  tax  of  one-half  of  one  per  cent  on  direct  inherit- 
ances, and  reduced  the  collateral-inheritance  tax  to  three 
per  cent.^  In  either  case,  the  tax  applies  only  to  so  much 
of  an  estate  as  exceeds  $10,000  in  value.     The  exemption 

^  Acts  of  1907,  chap.  217. 

-  Report  of  the  Special  Commission  on  Taxation,  1887,  pp.  33,  46. 
3  Public  Acts  of  1889,  chap.  180.         *  Public  Acts  of  1893,  chap.  257. 
^  Public  Acts  of  1897,  chap.  201. 


2oi]  THE  UNITED  STATES  131 

in  favor  of  charitable,  educational,  religious,  and  other  in- 
stitutions is  discontinued,  as  also  is  the  preference  for  a  few 
years  shown  brothers  and  sisters ;  the  only  relatives  paying 
the  lower  rate  are  the  decedent's  parents,  husband  or  wife, 
lineal  descendants,  and  legally  adopted  children. 

XVI.   Massachusetts 

For  two  years,  from  1841  to  1843,^  Massachusetts  levied 
a  light  probate  duty  of  one-fourth  of  one  per  cent,  to  pay 
the  expenses  of  the  probate  courts. 

In  October,  1889,  the  Boston  Executive  Business  As- 
sociation's special  committee  on  taxation,  of  which  Mr. 
Jonathan  A.  Lane  was  chairman,  recommended  in  its  re- 
port a  collateral-inheritance  tax  like  that  of  New  York, 
and  also  a  tax  of  two  and  one-half  per  cent  or  more  on 
direct  inheritances  of  personal  property,  to  replace  the  per- 
sonal property  tax.  It  was  estimated  by  the  committee 
that  these  two  taxes  would  yield  at  least  $4,000,000  a  year. 
An  inheritance  tax  had  not  long  before  this  been  proposed 
and  defeated  in  the  committees  of  the  legislature ;  but  after 
the  project  had  been  recommended  by  two  successive  gov- 
ernors a  bill  introduced  at  the  session  of  1891  met  with  a 
better  fate,  becoming  law  on  June  11.^  It  imposed  a  tax 
of  five  per  cent  on  collateral  relatives  only,  the  exempt  suc- 
cessors being  the  decedent's  father,  mother,  husband  or  wife, 
lineal  descendants,  brothers  and  sisters,  adopted  children 
and  their  descendants,  sons-in-law  and  daughters-in-law, 
and  charitable,  educational,  and  religious  societies  or  in- 
stitutions which  are  exempt  from  the  property  tax.  The 
original  act  applied  only  to  estates  of  more  than  $10,000 
in  value;  this  exemption  was  discontinued  in  1901,^  but  not 

1  Acts  of  1841,  chap.  123;  repealed  by  Acts  of  1843.  chap.  11. 

2  Acts  of  1891,  chap.  425.  3  Acts  of  1901,  chap.  297. 


132  THE  INHERITANCE  TAX  [302 

until  after  individual  shares  of  five  hundred  dollars  or  less 
had  been  exempted/ 

The  tax  was  at  first  made  payable  either  to  the  county 
treasurer  or  directly  to  the  Treasurer  of  the  Commonwealth, 
but  since  1895  has  been  payable  only  to  the  latter  officer.^ 

The  Massachusetts  Tax  Commission  of  1893-4  strongly 
urged  the  adoption  of  a  progressive  inheritance  tax.^  The 
commission  which  reported  in  1897  referred  to  the  difficul- 
ties, constitutional  and  other,  of  progressive  taxation,  but  rec- 
ommended a  direct-inheritance  tax  of  five  per  cent,  the  rate 
which  already  applied  to  collateral  heirs/  It  was  proposed, 
however,  to  exempt  estates  of  $10,000  or  less,  and  to  grant 
estates  of  from  $10,000  to  $25,000  an  abatement  of  $5000. 
This  tax  and  a  habitation  tax  were  suggested  to  take  the 
place  of  the  existing  taxation  of  intangible  personalty. 
The  House  Committee  on  Taxation,  however,  reported  ad- 
versely to  both  these  proposals ;  ^  and  nothing  came  of  them. 
More  recently.  Governors  Bates  and  Douglas  have  recom- 
mended extending  the  inheritance  tax  to  direct  heirs ;  and 
the  legislature  of  1907  has  done  so  by  an  act  "  effective 
September  ist.  Relatives  of  Class  A,  comprising  the  de- 
cedent's husband  or  wife,  lineal  ancestors  and  descendants, 
adopted  children  and  their  descendants,  sons-in-law  and 
daughters-in-law,  are  taxed  one  per  cent  on  amounts  of 
$50,000  or  less,  one  and  one-half  per  cent  on  amounts  be- 
tween $50,000  and  $100,000,  and  two  per  cent  on  amounts 
exceeding    $100,000.       Relatives    of    Class    B,    comprising 

1  Acts  of  1895,  chap.  307.  -  Acts  of  1895.  cliap.  430. 

3  Full  Report  of  tJic  Joint  Special  Committee  on  Taxation,  1894,  pp. 
20-25. 

*  Report  of  the  Co;nmission  on  Taxation,  1897.  pp.  92-104,  189-199. 

5  House  Document  no.  1259,  p.  37. 

6  Acts  of  1907,  chap.  563. 


303]  THE  UNITED  STATES  130 

brothers  and  sisters,  nephews  and  nieces,  are  required  to 
pay  three  per  cent  on  amounts  not  exceeding  $25,000,  four 
per  cent  on  amounts  between  $25,000  and  $100,000,  and 
five  per  cent  on  amounts  exceeding  $100,000.  More  dis- 
tant relatives  and  strangers  are  taxed  five  per  cent  regard- 
less of  amount.  Shares  passing  to  the  decedent's  husband 
or  wife,  father,  mother,  children  or  adopted  ch'ldren  are 
taxable  only  when  they  exceed  $10,000,  and  other  shares  only 
when  they  exceed  $1,000  in  value;  and  no  share  is  to  be 
reduced  by  the  tax  below  the  amount  of  the  exemption. 
Bequests  for  charitable  purposes,  or  to  educational  or  relig- 
ious societies  or  institutions  whose  property  is  exempt 
from  taxation,  or  to  cities  or  towns  for  public  purposes, 
are  exempt. 

The  act  contains  some  interesting  provisions  intended  to 
avoid  double  taxation.  Shares  of  non-resident  decedents 
in  a  railroad,  street  railway,  telegraph,  or  telephone  com- 
pany incorporated  in  IMassachusetts  and  also  in  another 
state  are  considered  within  the  jurisdiction  of  Massachu- 
setts only  to  the  extent  that  the  line  is  in  that  state.  In- 
heritance taxes  paid  elsewhere  on  property  of  residents  of 
Massachusetts  are  to  be  deducted  from  the  tax  payable 
there,  and  those  paid  elsewhere  on  property  within  the 
jurisdiction  of  Massachusetts  are  also  to  be  deducted  if 
estates  of  Massachusetts  citizens  are  similarly  favored  in 
the  other  state  or  country. 

XVII.  Tennessee 

A  five  per  cent  collateral-inheritance  tax  was  introduced 
in  Tennessee  in  1891,^  and  continued  in  1893  both  by  the 
general  revenue  act "  and  by  a  separate  inheritance-tax  act  ^ 

^  Acts  of  the  Extraordinary  Session,   1891,  chap.  25,  §  6. 

2  Acts  of  1893,  chap.  89,  §  7.  ^  Ibid.,  chap.  174. 


134  J""^^  INHERITANCE  TAX  [304 

with  somewhat  different  exemptions.  The  provisions  of 
the  general  revenue  act  having  been  repealed  by  implica- 
tion by  the  revenue  act  of  1895,  the  other  act,  which  ex- 
empted estates  valued  at  less  than  two  hundred  and  fifty 
dollars,  remains  in  force, ^  with  an  amendment  ^  exempting 
religious,  charitable,  scientific,  literary,  and  educational 
institutions.  The  payments  are  made  to  the  clerks  of  the 
county  courts,  and  accounted  for  by  them  to  the  State 
Comptroller. 

XVIII.  New  Jersey 

New  Jersey  has  a  five  per  cent  collateral-inheritance  tax 
dating  from  March  23,  1892.^  The  exempt  relatives  are 
the  decedent's  father,  mother,  husband  or  wife,  brothers 
and  sisters,  children  and  lineal  descendants,  sons-in-law  and 
daughters-in-law;  and  all  estates  of  less  than  five  hundred 
dollars  are  also  exempt.  The  original  act  has  been  revised 
at  various  times  *  so  as  to  exempt  bequests  to  benevolent 
and  religious  institutions,  including  public  libraries  and 
Bible  and  tract  societies. 

An  amendment  of  1906  "'  introduces  the  tax-inquisitor 
principle,  by  providing  that  when  no  letters  testamentary  or 
of  administration  are  taken  out  on  an  estate  liable  to  in- 
heritance tax  within  one  year  from  the  decedent's  death, 
the  Comptroller  may  enter  into  an  agreement  with  any  per- 
son giving  him  information  of  the  property  liable  to  taxa- 

1  Zickler  vs.  Union  Bank  and  Trust  Co..  104  Tenn.  277;  57  S.  W.  341. 

2  Acts  of  1903,  chap.  561.  3  Acts  of  1892,  chap.  122. 

4  Acts  of  1893,  chap.  210;  1894,  chap.  210;  1898,  chap  62.  The  act  of 
1893  was  declared  inoperative  so  far  as  devises  of  real  estate  were  con- 
cerned, because  devises  were  not  mentioned  in  the  title.  Van  Riper  vs. 
Heppenheimer,  17  N.  J.  Law  Jour.  49;  Doberniiller's  Appeal,  ibid.,  378. 

^  Acts  of  1906,  chap.  227. 


305 J  '^'^^E.  UNITED  STATES  I^c 

tion,  to  pay  him  a  proportion  of  the  tax  collected  from  such 
property. 

When  the  tax  is  paid  within  one  year  from  the  decedent's 
death  there  is  a  discount  of  five  per  cent;  after  the  expira- 
tion of  that  period  interest  is  charged  at  ten  per  cent.' 

XIX.  Ohio 

Early  in  1893  '  the  General  Assembly  of  Ohio  imposed 
a  collateral-inheritance  tax  applying  only  to  estates  of  more 
than  $10,000,  the  rate  being  three  and  one-half  per  cent  on 
the  excess  above  that  amount.  The  following  year  ^  the 
rate  was  increased  to  five  per  cent,  the  exemption  reduced 
to  $200,  and  the  proceeds  assigned  three-fourths  to  the  state 
and  one-fourth  to  the  counties.  At  the  same  time  a  supple- 
mentary act  *  was  passed  providing  for  a  progressive  tax  on 
direct  inheritances  derived  from  estates  exceeding  $20,000 
in  value.  Ohio  was  thus  the  first  state  in  the  Union  to  ap- 
ply the  progressive  principle  to  the  inheritance  tax,  as 
well  as  one  of  the  first  to  tax  direct  heirs.  This  pro- 
gressive tax  applied  not  only  to  heirs  in  the  direct  line,  but 
also  to  brothers  and  sisters,  nephews  and  nieces,  who  were 
exempted  from  the  tax  on  collateral  relatives ;  and  the  rates 
were  as  shown  below : 

When  the  value  of  the  entire  property  of  the  decedent — 

Exceeds  $20,000  and  does  not  exceed  $50,000 i  per  cent. 


50,000 
100,000 

'                "                 100,000 . 

Ti^ 

'                  "                 200,000. 

2 

200,000 

"           300,000. 

3 

300,000 

'            "            500,000 . 

3/2 

500,000 

'                "             1,000.000. 

4 

1,000,000..  . 

5 
3,  p. 

1  Acts  ( 

Df  1906,  chap 

228 

-  Laws 

of 

18s 

M- 

3  Laws 

of  1894,  p.  I 

69. 

*  Ibid., 

P- 

166 

136  THE  INHERITANCE  TAX  [306 

While  this  measure  was  before  the  legislature  it  was  so 
amended  at  the  instance  of  its  enemies  that  the  exempted 
amount  was  not  to  be  deducted  from  the  value  of  taxable 
estates.  Apparently  this  was  done  with  a  view  to  making 
the  act  unconstitutional ;  if  so,  the  ruse  was  successful,  for 
the  Supreme  Court  of  the  state  declared  the  measure  uncon- 
stitutional in  June,  1895,  ^'"^  account  of  the  unecjually  oper- 
ating exemption  and  the  progressive  rates/  The  tax  on 
collateral  heirs,  to  which  neither  of  these  objections  applied, 
remained  in  force ; "  and  after  an  interval  of  nine  years  ^ 
the  legislature  imposed  a  two  per  cent  tax  on  direct  in- 
heritances, in  so  far  as  they  exceed  $300,  to  take  the  place 
of  the  ill-fated  progressive  tax  of  1894.  This  tax  was 
made  to  apply  to  the  decedent's  parents,  husband  or  wife, 
brothers  and  sisters,  nieces  and  nephews,  lineal  descendants, 
adoj^ted  children  and  their  descendants,  sons-in-law  and 
daughters-in-law;  more  distant  relatives  being  subject  to 
the  collateral-inheritance  tax  of  five  per  cent. 

Active  opposition  to  the  direct-inheritance  tax  having 
developed,  its  repeal  was  made  an  issue  in  the  Ohio  political 
campaign  of  1905,  and  the  outcome  led  Governor  Pattison 
to  express  the  belief,  in  his  message  to  the  legislature  of 
1906,  that  it  was  the  wish  of  the  great  majority  of  the  peo- 
ple of  the  state  that  the  law  should  be  repealed.  The 
grounds  of  objection  to  the  tax  Avere  not  stated;  but  the 
legislature  followed  his  suggestion  by  repealing  the  tax  on 
direct  heirs,  except  as  to  estates  in  which  the  inventory  had 
already  been  filed — a  curious  penalty  for  the  prompt  filing 
of  inventories.    Ohioans  who  favored  the  tax  doubt  whether 

1  State  vs.  Ferris,  53  Ohio  State.  314.     See  pp.  169-172,  infra. 

2  Hagerty  vs.  State,  55  Ohio  State,  613;  Annotated  Revised  Statutes 
of  Ohio,  1903,  §§  2731-1  to  2731-17. 

3  Laws  of  1904,  p.  398. 


307 J  THE  UNITED  STATES  1 37 

the  oposition  to  it  was  really  as  widespread  as  it  was  active, 
and  predict  that  the  tax  will  be  reiniposed,  perhaps  with  a 
more  generous  exemption  and  other  modifications. 

The  Ohio  collateral-inheritance  tax  law  offers  an  unusu- 
ally strong  inducement  to  prompt  payments,  in  a  discount  at 
the  rate  of  one  per  cent  for  each  full  month  remaining  be- 
fore the  expiration  of  a  year.  No  commission  is  allowed 
the  county  treasurers  for  collecting  the  tax,  but  three- 
fourths  of  the  necessary  expenses  of  collection  are  de- 
ducted from  the  state's  share  before  it  is  paid  over ;  in  other 
words,  the  expenses  are  divided  in  the  same  proportion 
as  the  proceeds. 

XX.  Maine 

An  inheritance  tax  was  recommended  by  the  Maine  Tax 
Commission  in  1890,  and  the  legislature  adopted  the  sug- 
gestion in  1893  ^  by  imposing  a  tax  of  two  and  one-half 
per  cent  on  collateral  heirs;  eight  years  later  the  rate  was 
increased  to  four  per  cent.^  Inheritances  of  five  hundred 
dollars  and  less  are  exempt,  and  the  tax  is  calculated  only 
on  the  excess  above  the  exempt  amount.  Educational  and 
benevolent  institutions  were  exempted  by  an  amendment  of 
1895,^  ^^'^'^1  tb^  same  favor  was  aftei'ward  extended  to  re- 
ligious institutions.* 

In  the  list  of  exempt  relatives  and  in  other  details  the 
Connecticut  law  of  1889  is  closely  followed. 

XXI.  California 

California  adopted,  in  1893,^  ^  ^^'^  P^^  ^^^''^  collateral- 
inheritance  tax   for  the  benefit  of  the  state  school   fund. 

1  Acts  of  1893,  chap.  146.  -  Acts  of  1901,  chap.  225. 

3  Acts  of  1895,  chap.  96.  •*  Acts  of  1903,  chap.  156. 

5  Statutes  of  1893,  chap.  168. 


138  THE  INHERITANCE  TAX  [308 

Estates  of  less  than  five  hundred  dollars  were  exempt.  The 
model  for  the  California  statute  was  the  New  York  law  as 
it  stood  before  the  extension  of  the  tax  to  direct  heirs. 

Governor  Pardee,  in  his  message  of  January,  1905, 
recommended  to  the  legislature  that  it  give  careful  consider- 
ation to  the  question  whether  the  application  of  the  inherit- 
ance-tax law  should  be  extended,  first  by  taxing  direct  as 
well  as  collateral  inheritances,  and  secondly  by  making  the 
tax  progressive.  The  legislature  adopted  his  suggestion  by 
practically  re-enacting  for  California  ^  the  provisions  of  the 
Wisconsin  inheritance-tax  law.  The  rates  are  the  same  as 
in  Wisconsin :  that  is  to  say,  the  primary  rates  for  an  in- 
heritance not  exceeding  $25,000  are  one  per  cent  for  direct 
heirs;  one  and  one-half  per  cent  for  brothers  and  sisters 
and  their  descendants,  sons-in-law  and  daughters-in-law ; 
three  per  cent  for  uncles  and  aunts  and  their  descendants; 
four  per  cent  for  great-uncles  and  great-aunts  and  their 
descendants ;  and  five  per  cent  for  others.  The  primary 
rates  are  multiplied  by  i^  for  the  excess  above  $25,000 
in  each  inheritance  up  to  $50,000 ;  by  2  for  the  excess  above 
$50,000  up  to  $100,000;  by  2^  for  the  excess  above  $100,- 
000  up  to  $500,000 ;  and  by  3  upon  the  excess  above  $500r 
000,  thus  making  the  maximum  rate  for  large  amounts  go- 
ing to  strangers  in  blood  fifteen  per  cent.  The  principal 
difference  between  the  California  law  and  its  model  is  that 
the  exemptions  are  somewhat  more  generous  than  in  Wis- 
consin, and  make  a  well-considered  distinction  between 
minor  and  adult  children.  In  the  case  of  a  widow  or  minor 
child  there  is  an  exemption  of  $10,000,  while  the  exemp- 
tion allowed  a  surviving  husband  or  any  other  direct  heir 
is  but  $4000.  The  nearest  collateral  relatives  are  allowed 
an  exemption  of  $2000  each;  uncles  and  aunts  and  their 

1  Statutes  of  1905,  chap.  314. 


309J  '^'-^^  UNITED  STATES  I^q 

descendants,  $1500;  great-uncles  and  great-aunts  and  their 
descendants,  $1000,  and  others,  $500.  Bequests  to  charit- 
able, benevolent,  educational,  and  public  institutions  are 
wholly  exempted.  In  the  case  of  taxes  paid  within  six 
months  of  the  decedent's  death,  a  discount  of  five  per  cent 
is  allowed;  on  taxes  not  paid  within  18  months,  interest  is 
charged.  County  treasurers  are  charged  with  the  duty  of 
collecting  these  taxes,  and  are  allowed  to  retain,  in  addition 
to  their  other  salaries  or  fees,  three  per  cent  of  the  first 
$50,000  accounted  for  each  year,  one  and  one-half  per  cent 
of  the  next  $50,000,  and  one-half  of  one  per  cent  on  all 
additional  sums;  but  any  special  attorneys  needed  for  en- 
forcing the  payment  of  these  taxes  must  be  compensated 
out  of  this  commission.  The  revenue  from  this  tax  up  to 
$250,000  each  year  is  applied  to  the  school  fund;  any  ex- 
cess above  that  amount  goes  to  the  general  fund  of  the  state. 

XXII.  Michigan 

In  1893  ^  ^1''^  legislature  of  Michigan  enacted  an  inherit- 
ance-tax law  patterned  closely  after  that  of  New  York,  and 
therefore  affecting  direct  as  well  as  collateral  heirs.  The 
exemption  in  the  case  of  direct  heirs,  however,  was  changed 
from  $10,000  to  $5,000.  This  statute  was  declared  uncon- 
stitutional,- as  it  disregarded  a  provision  in  the  constitution 
of  Michigan  requiring  "  specific  taxes  "  to  be  applied  first 
to  interest  on  the  educational  trust  funds,  and  then  to  the 
interest  and  principal  of  the  state  debt. 

In  1899  ^  the  tax  was  reimposed  in  a  form  to  meet  the 
requirements  of  the  constitution.  Estates  of  the  value  of 
five  hundred   dollars   or  more  passing  to   collateral   heirs 

1  Public  Acts  of  1893,  no.  205. 

2  Chambe  vs.  Judge  of  Probate.  100  Mich.  1 12. 

3  Public  Acts  of  1899,  no.  188. 


I40  THE  INHERITANCE  TAX  [310 

were  taxed  five  per  cent,  while  the  decedent's  parents,  hus- 
band or  wife,  children  and  lineal  descendants,  brothers  and 
sisters,  sons-in-law,  daughters-in-law,  and  adopted  children 
were  required  to  pay  one  per  cent  on  personal  property  in 
so  far  as  it  exceeded  $5000  in  value.  In  1903  ^  the  exemp- 
tions were  reduced  to  one  hundred  dollars  for  collateral 
heirs  and  $2000  for  direct  heirs,  but  were  made  to  apply  to 
each  individual  share  instead  of  to  the  estate  as  a  whole; 
and  there  is  no  corresponding  deduction  from  shares  which 
are  large  enough  to  be  taxed  at  all. 

The  tax  is  payable  to  the  county  treasurer,  who  is  allowed 
to  retain  a  commission  of  one  per  cent.  If  the  tax  is  paid 
within  one  year  of  the  decedent's  death  there  is  a  discount 
of  five  per  cent.  In  compliance  with  the  constitution,  the 
proceeds  are  applied  first  in  paying  the  interest  on  the  pri- 
mary school,  university,  and  other  educational  funds,  and 
then  to  paying  the  interest  and  principal  of  the  state  debt; 
when  the  state  debt  is  extinguished,  other  than  the  amounts 
due  to  educational  funds,  the  proceeds  are  to  go  into  the 
primary-school  interest  fund. 

XXIII.  Missouri 

In  1895  the  legislature  of  Missouri  imposed  a  collat- 
eral-inheritance tax  of  five  per  cent  on  small  amounts  and 
seven  and  one-half  per  cent  on  the  excess  above  $io,ooo.' 
This  was  accompanied  by  an  additional  tax  on  the  organ- 
ization of  corporations  (applicable  also  to  foreign  corpora- 
tions proposing  to  do  business  in  the  state)  at  the  rate  of 
twenty-five  cents  for  each  thousand  dollars  of  capital  stock. 
The  two  taxes  being  thus  joined  in  one  statute,  the  latter 
seemed  to  bear  some  resemblance  to  the  tax  in  lieu  of  an 

1  Public  Acts  of  1903.  no.  195.  For  recent  amendments  see  Public 
Acts  of  1907,  nos.  155  and  328. 

2  Laws  of  189s,  p.  278. 


31 1  ]  THE  UNITED  STATES  I4I 

inheritance  tax  which  some  countries  impose  upon  corpora- 
tions in  view  of  their  immortaHty ;  but  the  act  provided 
also  for  a  hcense  tax  on  manufacturers  of  patent  medicines, 
which  tends  to  dispel  the  idea  that  the  organization  tax 
was  based  upon  any  such  definite  principle.  One-fourth  of 
the  proceeds  of  all  three  taxes  was  assigned  to  the  state 
"  seminary  fund ;"  the  remainder  was  to  constitute  a  "  state 
university  scholarship  fund,"  to  be  held  by  the  county  treas- 
urers for  the  benefit  of  the  most  promising  needy  matricu- 
lants from  each  county. 

This  law  was  annulled  by  the  Supreme  Court  of  the  state/ 
mainly  on  the  ground  that  the  establishment  of  scholarships 
is  not  a  public  purpose  for  which  taxes  may  be  levied,  though 
it  was  also  criticised  as  imposing  double  taxation  and  lack- 
ing in  uniformity.  In  the  meantime  the  seven  and  one-half 
per  cent  rate  had  been  stricken  out  -  at  the  instance  of  the 
friends  of  the  law,  who  hoped  that  its  chances  in  the  courts 
would  be  improved  by  relinquishing  the  progressive  feature. 

In  1899  ^  the  five  per  cent  collateral-inheritance  tax  was 
reimposed  in  a  form  to  meet  the  objections  of  the  court. 
Under  this  enactment  the  proceeds,  up  to  an  annual  amount 
equal  ,to  one-tenth  of  a  mill  on  the  dollar  of  the  assessed 
valuation  of  the  taxable  property  of  the  state,  goes  into  the 
state  seminary  fund  for  the  maintenance  and  equipment 
of  the  University  of  Missouri,  while  an}'  excess  above  that 
amount  is  to  go  into  a  separate  fund  to  be  appropriated  for 
other  educational  purposes.  Bequests  for  educational,  char- 
itable, and  religious  purposes  are  exempt  from  taxation. 

The  tax  is  payable  to  the  county  collector  of  revenue,  who 
is  allowed  to  retain  five  per  cent  of  the  first  $20,000  re- 

1  State  vs.  Switzler,  143  Mo.  2^7;  45  S.  W.  245. 
-  Laws  of  1897,  P-  -Z7- 
3  Laws  of  1899,  p.  328. 


142  THE  INHERITANCE  TAX  [312 

ceived  each  year  and  three  per  cent  of  any  additional  sum; 
of  this  commission,  however,  one-fifth  must  be  paid  over  to 
the  probate  judge  of  the  county  to  defray  clerical  expenses 
arising-  in  his  office  in  connection  with  the  tax. 

XXIV.   Iowa 

The  loAva  Revenue  Commission  of  1892-3  included 
among  its  recommendations,  and  in  the  bill  it  submitted,  a 
progressive  tax  on  both  collateral  and  direct  heirs,  ranging 
from  five  to  ten  per  cent  for  the  former  and  from  one  to 
five  per  cent  for  the  latter,  but  allowing  liberal  exemptions 
and  corresponding  deductions  in  all  cases. ^  Instead  of 
passing  this  part  of  the  bill  as  reported  by  the  commission, 
the  legislature  simply  imposed  a  proportional  tax  on  col- 
lateral inheritances  exceeding  $1000  in  value,  at  the  rate  of 
five  per  cent  on  the  excess."  The  law  has  since  been 
amended  ^  by  the  introduction  of  discriminating  rates 
against  non-resident  aliens,  who  are  taxed  twenty  per  cent, 
except  that  if  they  are  brothers  or  sisters  of  the  decedent 
the  rate  is  ten  per  cent.  More  recent  amendments  "*  have 
added  step-children  and  their  descendants  to  the  list  of 
exempt  heirs,  and  extended  the  original  exemption  of  bene- 
volent and  educational  institutions  to  hospitals,  public  lib- 
raries, and  public  art  galleries  kept  open  to  the  free  use  of 
the  pubhc  at  least  three  days  of  each  week. 

XXV.  Vermont 
In   1896  '"  Vermont  adopted  a  collateral-inheritance  tax 

1  Report  of  the  Revenue  Commission  of  the  State  of  Iowa.  1893,  pp. 
15,  43- 

2  Acts  of  1896,  chap.  28.  3  Acts  of  1904,  chap.  51. 

*  Acts  of  1906,  chaps.  54,  55.  '  Public  Acts  of  1896,  no.  46. 


313]  THE  UNITED  STATES  I43 

of  five  per  cent,  with  an  exemption  of  v$2000.  In  1904  ^ 
the  law  was  completely  revised,  and  the  exemption  of  small 
amounts  was  discontinued.  Heirs  other  than  the  decedent's 
parents,  husband  or  wife,  lineal  descendants,  adopted  chil- 
dren and  their  descendants,  sons-in-law  and  daughters-in- 
law  are  now  required  to  pay  five  per  cent  in  all  cases.  Be- 
quests to  charitable,  educational,  or  religious  societies  or 
institutions  created  under  the  laws  of  Vermont  and  having 
their  principal  ofifice  in  that  state,  and  bequests  for  cemetery 
purposes  or  for  the  purchase  or  maintenance  of  burial  lots, 
are  exempt. 

Vermont  has  also  a  system  of  approximately  propor- 
tional probate  fees.  For  estates  the  assets  of  which  exceed 
$350  but  do  not  exceed  $5000  the  amount  is  two  dollars,  and 
the  fee  is  increased  by  two  dollars  for  every  further  $5000 
or  fraction  thereof." 

XXVI.  Montana 

In  1897  the  Montana  legislature  passed  an  act  ''  which 
was  contradictory  in  its  terms,  but  was  probably  intended 
to  tax  collateral  inheritances  five  per  cent,  with  an  exemp- 
tion of  estates  of  less  than  $500,  and  direct  inheritances  of 
personal  property  one  per  cent,  with  an  exemption  in  favor 
of  estates  less  than  $7500  in  value.  Forty  per  cent  of  the 
revenue  from  this  source  is  assigned  to  the  general  school 
funds  of  the  counties,  and  the  remainder  to  the  general 
fund  of  the  state. 

XXVII.  Colorado 

A  bill  modeled  upon  the  Illinois  inheritance-tax  law  was 
introduced  in  the  Colorado  legislature  in  1897,  and  referred 
to  the  State  Supreme  Court  for  an  opinion  as  to  its  con- 

1  Public  Acts  of  1904,  no.  30.  2  Vermont  Statutes.  1894.  §  5373. 

3  Laws  of  1897,  p.  83. 


144  ^^^  INHERITANCE  TAX  [314 

stitiitionality,  according  to  the  Colorado  custom.  The  court 
rephed  that  the  bill  was  not  in  conflict  with  the  provision 
of  the  state  constitution  requiring  taxes  to  be  uniform  upon 
the  same  class  of  subjects,  but  at  the  same  time  said  that  the 
Illinois  statute  from  which  it  was  taken  was  "  one  of  the 
most  objectionable  acts  upon  the  subject  to  be  found." ^  The 
bill  passed  the  lower  house,  but  went  no  further.  In  1901, 
however,  a  very  similar  measure  became  law  as  part  of  the 
general  revenue  act  adopted  that  year;  and  in  1902  it 
was  re-enacted  with  some  modificatioins.^  The  classifica- 
tion of  relatives  and  the  progressive  scale  applicable  to  dis- 
tant relatives  and  strangers  are  the  same  as  in  the  Illinois 
law,  but  near  relatives  are  taxed  somewhat  more  heavily; 
direct  heirs  and  brothers  and  sisters  pay  two  per  cent  on 
the  excess  above  $10,000,  while  uncles  and  aunts,  nephews 
and  nieces,  and  their  descendants  pay  three  per  cent,  with 
noi  exemption  beyond  the  five  hundred  dollars  allowed  to 
the  remote  relatives  and  st^rangers  who'  pay  from  three  to 
six  per  cent  according  to  the  size  of  the  estate. 

XXVIII.  Nebraska 
A  few  days  before  the  approval  of  the  Colorado  revenue 
law  of  1 90 1  Nebraska  adopted  an  inheritance  tax  ^  pat- 
terned even  more  faithfully  upon  the  Illinois  law.  The 
only  important  point  in  which  the  model  was  not  followed 
was  the  high  exemption  allowed  immediate  relatives ;  in 
Nebraska  direct  heirs  and  brothers  and  sisters  pay  one  per 
cent  on  the  excess  above  $10,000  received  by  each,  while  as 
in  Illinois,  nephews,  etc.,  pay  two  per  cent  on  the  excess 

1  In  re  House  Bill  No.  22,  23  Colo.  492 ;  48  Pac.  R.  535.     The  consti- 
tutionality of  the  Illinois  act  was  in  question  at  this  time. 

2  Laws  of  1901,  chap  94,  §§  23-43;  1902,  chap.  3,  §§  21-41. 

3  Laws  of  1901,  chap.  54;  amended  by  Laws  of  1905,  chap.  117;  1907, 
chaps.  103,  104. 


315] 


THE  UNITED  STATES 


145 


above  $2000  received  by  each,  and  cbstant  relatives  and 
strangers  pay  from  three  to  six  per  cent  according  to  the 
value  of  the  estate.  The  proceeds  go  into  a  special  fund 
in  each  county  for  the  permanent  improvement  of  roads. 

XXIX.  Washington 

The  Washington  law  of  March  6,  1901/  imposes  a  tax 
of  one  per  cent  on  all  sums  above  the  first  $10,000  passing 
to  a  decedent's  parents,  husband  or  wife,  lineal  descendants, 
adopted  children  or  their  descendants,  and  a  progressive 
tax  on  collateral  heirs  at  the  following  rates : 


To  and  including  the  third  degree. 
Beyond  the  third  degree 


First 
^50,000. 


Per  cent. 
3 


^50,000- 
$100,000. 


Per  cent. 
4X< 


Excess  above 
^100,000. 


Per  cent. 
6 


In  1905  bequests  for  certain  charitable  purposes  were 
exempted,"  and  the  administrative  provisions  were  some- 
what elaborated.^  In  1907  non-resident  alien  collateral 
heirs  were  taxed  twenty-five  per  cent.* 

XXX.  Utah 

The  Utah  inheritance  tax,  which  also  dates  from  1901,"'* 
is  noteworthy  in  that  it  is  levied  at  the  uniform  rate  of  five 
per  cent  upon  all  inheritances,  direct  and  collateral  alike, 
in  so  far  as  the  entire  estate  exceeds  $10,000. *'     As  prop- 


^  Session  Laws  of  1901,  chap.  55. 
2  Session  Laws  of  1905,  chap.  93. 
*  Session  Laws  of  1907,  chap.  217. 
s  Laws  of  1901,  chap.  62. 


3  Ibid.,  chap.  114. 
^  Laws  of  1903,  chap.  93. 


146  THE  INHERITANCE  TAX  [315 

erty  is  usually  transmitted  in  the  direct  line,  this  is  for 
practical  purposes  heavier  than  the  Washington  tax.  The 
law  was  elaborated  on  the  administrative  side  in  1905/  but 
without  altering  its  main  features. 

XXXI.  Arkansas 

Arkansas  adopted  in  1901  "  a  collateral-inheritance  tax 
of  the  old-fashioned  type,  with  a  rate  of  five  per  cent  and 
no  exemptions  except  that  in  favor  of  the  decedent's  par- 
ents, husband  or  wife,  lineal  descendants,  adopted  children 
and  their  descendants.  Two  years  later  ^  the  exemption 
was  extended  to  include  grandparents. 

XXXII.  Oregon 

Governor  Chamberlain  of  Oregon  recommended  an  in- 
heritance tax  in  his  message  of  1903,  on  the  ground  that 
"  many,  if  not  all  the  estates  going  through  probate  escape 
a  just  share  of  the  burdens  of  taxation  during  the  lifetime 
of  the  testators  or  intestates."  The  legislature  promptly 
adopted  this  recommendation  by  imposing  a  tax  on  both 
direct  and  collateral  inheritances/  evidently  based  upon  the 
Illinois  law.  On  property  passing  to  the  decedent's  father, 
mother,  husband,  wife,  child,  brother,  sister,  son-in-law, 
daughter-in-law,  adopted  child,  any  person  to  whom  the 
deceased  for  not  less  than  ten  years  prior  to  death  stood  in 
the  acknowledged  relation  of  a  parent,  or  any  lineal  de- 
scendant born  in  lawful  wedlock,  the  rate  is  one  per  cent; 
estates  valued  at  less  than  $10,000  are  exempt,  and  the  tax 
is  to  be  levied  only  on  the  excess  above  $5000  received  by 
each  person.     For  the  decedent's  uncle,  aunt,  nephew,  niece, 

'^  Laws  of  1905,  chap.  119.  ^  l^^s  of  1901,  chap.  156. 

3  Laws  of  1903,  chap.  89.  *  General  Laws  of  1903,  p.  49. 


317]  THE  UNITED  STATES  I47 

or  any  lineal  descendant  of  the  same  the  rate  is  two  per  cent 
on  the  excess  above  $2000  received  by  each  person.  In  all 
other  cases,  the  rates  are  three  per  cent  on  amounts  over 
$500  and  not  exceeding  $10,000,  four  per  cent  on  amounts 
over  $10,000  and  not  exceeding  $20,000,  five  per  cent  on 
amounts  over  $20,000  and  not  exceeding  $50,000,  and  six 
per  cent  on  all  amounts  over  $50,000.  Benevolent  and 
charitable  institutions  incorporated  in  Oregon  and  actu- 
ally engaged  therein  in  carrying  out  the  work  for  which  they 
are  incorporated  are  exempt ;  and  by  an  amendment  of 
1905  ^   etlucational  institutions  are  equally  favored. 

When  the  tax  is  paid  within  eight  months  from  the  de- 
cedent's death  a  discount  of  five  per  cent  is  allowed :  when 
it  is  not  paid  within  that  time  interest  is  charged. 

The  State  Treasurer,  in  his  last  biennial  report,  recom- 
mended cutting  in  two  the  exemption  to  direct  heirs,  esti- 
mating that  this  would  at  once  double  the  revenue  from 
this  tax. 

XXXIII.  Wyoming 

By  an  act  approved  February  21,  1903,"  the  Wyoming 
legislature  imposed  both  a  direct  and  a  collateral-inheritance 
tax.  On  estates  passing  to  the  decedent's  father,  mother, 
husband,  wife,  children,  brothers,  sisters,  sons-in-law, 
daughters-in-law,  adopted  children,  any  person  to  whom  the 
deceased  for  not  less  than  ten  years  prior  to  death  stood  in 
the  acknowledged  relation  of  a  parent,  or  any  lineal  descen- 
dants born  in  lawful  wedlock,  the  rate  is  two  per  cent  on 
the  excess  above  $10,000;  but  the  decedent's  husband  or 
wife  and  children,  if  bona-fide  residents  of  Wyoming,  are 
not  taxed   unless  their   individual   shares   exceed   $25,000. 

1  General  Laws  of  1905,  chap.  178. 

2  Laws  of  1903,  chap.  80. 


148  THE  INHERITANCE  TAX  [318 

The  collateral-inheritance  tax  is  at  the  rate  of  five  per  cent, 
estates  valued  at  less  than  five  himdred  dollars  being  ex- 
empt. Inheritance  taxes  are  declared  due  and  payable  at 
the  death  of  the  decedent,  and  interest  at  the  rate  of  six 
per  cent  is  provided  for  unless  they  are  paid  within  six 
months,  in  such  case  a  discount  of  five  per  cent  being  al- 
lowed. 

When  an  estate  for  life  or  for  a  term  of  years  is  be- 
queathed to  the  testator's  father,  mother,  husband,  wife, 
brother,  sister,  lineal  descendant,  son-in-law  or  daughter-in- 
law,  with  a  remainder  to  a  collateral  heir,  stranger  in  blood, 
or  body  politic  or  corporate,  the  life  or  term  estate  is  ex- 
empt, and  the  tax  on  the  remainder  becomes  payable  imme- 
diately, though  by  giving  bond  payment  may  be  deferred 
till  the  property  is  actually  acquired.  This  exemption  and 
the  accompanying  conditions  and  limitations  can  be  ex- 
plained only  on  the  theory  that  they  were  copied  without 
revision  from  some  statute  imposing  a  collateral-inheritance 
tax  only. 

XXXIV.  North  Dakota 

The  North  Dakota  act  of  March  10,  1903,^  imposes  a 
collateral-inheritance  tax  which  is  remarkable  both  for  its 
low  rate  and  for  its  generous  exemption.  Property  within 
the  jurisdiction  of  North  Dakota  passing  to  any  person 
other  than  the  decedent's  father,  mother,  husband,  wife, 
lineal  descendants,  adopted  children  or  lineal  descendants 
of  an  adopted  child,  except  charitable,  educational,  or  re- 
ligious societies  or  institutions  in  North  Dakota,  is  made 
subject  to  a  tax  of  two  per  cent  of  its  valuation  above  the 
sum  of  $25,000,  after  the  payment  of  all  debts;  and  debts 
are  so  defined  as  to  include  local  and  state  taxes  due  prior 

1  Laws  of  1903,  chap.  171. 


319]  ^i^^^E  UNITED  STATES  j^g 

to  the  decedent's  death,  a  reasonable  sum  for  funeral  ex- 
penses, and  court  costs,  including  costs  of  appraisement  for 
the  inheritance  tax  and  the  statutory  fees  of  executors,  ad- 
ministrators, or  trustees. 

XXXV.   South  Dakota 

In  imposing  an  inheritance  tax,  in  1905/  the  South 
Dakota  legislature  divided  heirs  into  three  classes  as  in  Il- 
linois and  Colorado,  and  applied  progressive  rates  to  dis- 
tant relatives  and  strangers  in  blood.  Direct  heirs  and 
brothers  and  sisters  are  taxed  only  one  per  cent,  without  re- 
gard to  the  amount  of  the  inheritance,  while  estates  of 
$20,000  or  less  passing  to  the  widow,  and  $5000  each  to 
other  direct  heirs,  are  exempt.  The  decedent's  uncles  and 
aunts,  nephews  and  nieces,  and  their  descendants  are  taxed 
two  per  cent,  with  an  exemption  of  $500  each.  More  dis- 
tant relatives  and  strangers  are  taxed  four  per  cent  on 
amounts  of  $10,000  or  less,  six  per  cent  on  the  excess  above 
$10,000  up  to  $20,000,  eight  per  cent  on  the  excess  above 
$20,000  up  to  $50,000,  and  ten  per  cent  on  the  excess  above 
$50,000,  with  an  exemption  of  one  hundred  dollars  to  each 
heir.  .\  discount  of  five  per  cent  is  allowed  when  the  tax 
is  paid  within  one  year;  in  other  cases,  interest  at  six  per 
cent  is  charged. 

XXXVI.  Kentucky 

The  Kentucky  legislature  of  1906  ■  imposed  a  five  per 
cent  collateral-inheritance  tax,  with  an  exemption  of  the 
first  $500  of  every  estate,  and  a  discount  of  five  per  cent 
if  the  tax  is  paid  within  nine  months  after  the  decedent's 
death.     If  the  tax  is  not  paid  within  eighteen  months,  in- 

^  Laws  of  1905,  chap.  54. 

2  Laws  of  1906,  chap.  22,  art.  19. 


ISO 


THE  INHERITANCE  TAX 


[32Q 


terest  at  the  rate  of  ten  per  cent  is  charged  for  the  entire 
period.  The  tax  is  paid  to  the  county  sheriffs  or  collectors^ 
and  by  them  transmitted  to  the  Auditor  of  Public  Accounts. 

XXXVII.  Idaho 

The  Idaho  law  of  March  16,  1907/  is  almost  a  literal 
copy  of  the  California  inheritance-tax  act  of  1905,  and  is 
therefore  very  similar  to  the  Wisconsin  law.  On  inherit- 
ances not  exceeding  $25,000  the  rates  are  from  one  to  five 
per  cent,  according  to  relationship.  Any  excess  above  $25,- 
000  is  subject  to  higher  rates,  increasing  to  three  times  the 
primary  rates  for  the  excess  above  $500,000.  The  exemp- 
tions, as  in  California,  are  amounts  of  $10,000  transferred 
to  the  widow  or  a  minor  child,  $4,000  transferred  to  other 
direct  heirs,  and  from  $2,000  down  to  five  hundred  dollars 
for  more  distant  relatives;  also  bequests  to  societies,  cor- 
porations and  institutions  exempt  by  law  from  taxation,  or 
for  benevolent,  educational  or  public  purposes. 

XXXVIII.  Texas 

The  Texas  legislature,  at  the  special  session  of  1907,' 
imposed  a  progressive  inheritance  tax  of  from  two  to  twelve 
per  cent  on  collateral  heirs.  The  rate  of  progression, 
though  very  regular  throughout,  is  more  rapid  for  distant 
than  for  immediate  relatives.     The  scale  is  shown  below : 


Lineal  ascendants,  brothers  and 
sisters  and  their  descendants. 

Uncles  and  aunts  and  their  de- 
scendants   

Others 


Exemp- 
tion. 


$2,000 


1,000 

SOD 


Up  to 
$10,000 


$10,000 
to 

$25,000 


2K 
4 


$25,000 

to 
$50,000 


$50,000   $100,000  Excess 

to  to         above 

$100,000  $500,000,  $500,000 


3^ 

6 
8^ 


^  General  Laws  of  1907,  p.  558. 

2  General  Laws  of  1907,  called  session,  chap.  21. 


32 1  ]  THE  UNITED  STATES  j-I 

Each  rate  of  the  progressive  scale  applies  only  to  its  re- 
spective fraction  of  the  inheritance.  The  decedent's  father 
and  mother,  husband  or  wife,  and  lineal  descendants  are 
exempt,  as  are  also  bequests  for  charitable,  educational,  or 
religious  purposes  to  be  carried  out  within  Texas  by  do- 
mestic corporations.  Payment  is  to  be  made  to  the  county 
collectors  of  taxes,  who  are  allowed  one  per  cent  of  the 
amount  as  their  compensation. 

XXXIX.  Hawaii 

At  the  time  of  its  annexation,  Hawaii  had  a  collateral- 
inheritance  tax  of  five  per  cent,  introduced  in  1892.^  In 
1905  the  tax  was  extended  to  direct  heirs,  who  are  required 
to  pay  two  per  cent  of  the  value  in  excess  of  $1,000  re- 
ceived by  each.  The  rate  for  collateral  heirs  remains  five 
per  cent,  and  is  applicable  to  the  excess  above  five  hundred 
dollars  in  each  case.  If  the  tax  is  paid  within  six  months 
from  the  death  of  the  decedent  a  discount  of  five  per  cent 
is  allowed.  Bequests  for  charitable,  benevolent,  educa- 
tional, and  public  purposes  are  exempt." 

XL.  Porto  Rico 

Porto  Rico  had  a  progressive  inheritance  tax  under  the 
Spanish  regime,  and  the  Hollander  Act  of  1901  ^  provides 
for  a  similar  tax.  It  is  difficult  to  tell  from  the  language 
of  the  act  whether  the  tax  was  intended  to  apply  to  direct 
heirs  or  not;  but  the  insular  Attorney-General  decided  that 
the  tax  was  due  from  children  on  the  death  of  the  mother, 
though  not  on  the  death  of  the  father.*  The  widow  is 
clearly  exempt,  but  the  surviving  husband  is  taxed.     The 

1  Revised  Laws  of  Hawaii,  1905,  chap.  100. 

2  Laws  of  1905.  Act  102.  3  Laws  of  1901,  p.  43. 
*  Opinions  of  the  Attorney-General  of  Porto  Rico,  i,  35. 


152 


THE  INHERITANCE  TAX 


[322 


rates  are  as  follows,  the  first  two  hnndred  dollars  of  each 
inheritance  being  exempt : 


Husband  and  lineal  descend- 
ants (from  mother) 


All  others. 


J?5,ooo 
or  less. 


$5,000- 
$20,000. 


Per  cent.      Per  cent. 

I  I  lU 


^% 


520,000- 
^50,000. 


Per  cent. 
2 
6 


Excess  above 
$50,000. 


Per  cent. 
3 


XLI.   Summary 

Inheritances  are  now  taxed  to  a  greater  or  less  extent  in 
thirty-six  states  of  the  Union,  and  in  Hawaii  and  Porto 
Rico.  Twenty  states  of  the  Union  tax  both  direct  and  col- 
lateral heirs;  and  in  thirteen  states  the  inheritance  tax  is  in 
some  degree  progressive.  Wisconsin,  California,  Idaho, 
Minnesota,  and  Massachusetts  have  progressive  rates  for 
both  direct  and  collateral  heirs;  in  Illinois,  Colorado,  Ne- 
braska, South  Dakota,  Oregon,  and  North  Carolina  the 
progressive  rates  apply  only  to  distant  relatives  and  stran- 
gers in  blood,  while  in  Washington  and  Texas  they  apply 
to  all  collateral  heirs.  Minnesota  and  Utah  make  no  dis- 
tinction between  direct  and  collateral  heirs;  in  all  other 
cases  in  which  direct  heirs  are  taxed  at  all  the  rates  are 
much  lower  and  the  exemption  (except  in  Connecticut  and 
North  Carolina)  much  larger  than  for  collateral  heirs. 
It  may  be  added  that  the  new  constitution  of  Oklahoma  ex- 
pressly authorizes  progressive  taxation  of  both  direct  and 
collateral  inheritances.  The  following  tabular  statement 
shows  the  main  provisions  of  the  state  laws  on  this  subject; 


323]  ^^^  UNITED  STATES 

Main  Provisions  of  American  Inheritance-Tax  Laws. 


153 


State. 


Arkansas  

California 

Colorado , 

Connecticut   . . . . 

Delaware^ 

Idaho 

Illinois 

Iowa 

Kentucky 

I/Ouisiana^  . . . .  , 

Maine 

Maryland 

Massachusetts. . . 

Michigan   

Minnesota 

Missouri 

Montana 

Nebraska 

New  Hampshire 
New  Jersey . . . . , 

New  York    

North  Carolina  . 
North  Dakota.  . . 

Ohio   , 

Oregon 

Pennsylvania  . . 
South  Dakota. .  ■ 

Tennessee ■ 

Texas . . 

Utah , 

Vermont 

Virginia 

Washington  . . . . 
West  Virginia . . . 

Wisconsin 

Wyoming 


Collateral. 


Rates.  Exemption. 


Per  cent. 

5 

3-6 
3 

5 

2-6 
5 
5 
5 
4 

3-5 

5 

5 

5 

2-6 

5 
5 
5 
1^-15 
2 

5 
2-6 

5 
2-10 

5 
2-12 

5 

5 

5 

3-12 

3-7}^ 

13^15 

5 


Direct. 


$500-2,000 
500 
10,000 
500 
500-2,000 
500-2,000 
1,000 
500 

500 

500 

1,000 

100 

10,000 

500 
500-2,000 

500 
500 
2,000 
25,000 
200 
500-2,000 
250 
100-500 
250 
500-2,000 
10,000 


100-500 
500 


Rates.  Exemption. 


Per  cent. 

1-3 

2 


1-3 
I 


r-2 


I 
I 

1-3 

2 


'l4,ooo 
10,000 
1 0,000 

'4,000 
20,000 


10,000 


10,000 

2,000 

10,000 

7,500 
10,000 


10,000 
2,000 


'5,000 
5,000 

10,000 


10,000 

20,000 

'2,000 

*  1 0,000 


'  Widows  and  (except  in  Wisconsin)  minor  children  taxable  only  on  the  excess  above  $10,000 
received  by  each. 
=  Tax  payable  only  by  strangers  in  blood. 

^Tax  not  payable  when  the  property  bore  its  just  proportion  of  taxes  prior  to  the  owner's 
death. 

*  Applies  to  personal  property  only. 

"  Decedents'  estates  of  less  than  $10,000  are  also  exempt, 

'  For  the  surviving  husband  or  wife  and  children,  if  residents  of  Wyoming,  $25,000. 


154  THE  INHERITANCE  TAX  [324 

XLII.  Administration 

In  their  administrative  provisions  some  of  the  state  in- 
heritance-tax laws  are  much  more  elaborate  than  others,  but 
there  is  a  general  similarity  in  the  essential  features.  The 
probate  courts  nominally  determine  the  amount  of  tax  due 
from  each  estate,  but  the  actual  assessment  is  usually  made 
by  one  or  more  appraisers  appointed  by  the  court.  Where 
the  only  shares  taxable  are  pecuniary  legacies,  as  often 
happens  in  the  case  of  a  collateral-inheritance  tax  merely, 
the  appointment  of  appraisers  is  unnecessary.  In  New 
York,  especially  in  New  York  City,  the  appointment  of  an 
appraiser  for  each  estate  was  found  to  lead  to  serious  abuses 
and  unnecessary  expense.  Although  (or  perhaps  because) 
the  appraisers'  fees  were  but  three  dollars  a  day,  it  became 
customary  to  delay  the  appraisement  unnecessarily,  and  to 
charge  for  each  day  of  the  delay.  ^  In  1899  a  committee  of 
the  Assembly  appointed  to  investigate  this  and  other  mat- 
ters in  connection  with  the  surrogates'  courts  of  New  York 
County  found  that  in  one  year  one  man  had  devoted  5,395 
days  to  his  duties  as  appraiser.  As  a  result  of  this  com- 
mittee's disclosures,  salaried  appraisers  were  promptly  pro- 
vided for  in  New  York,  Kings,  and  Erie  Counties,-  and  a 
year  later  ^  the  salary  system  was  extended  to  eleven  of 
the  other  more  populous  counties,  while  in  the  remaining 
forty-seven  counties  the  duty  of  appraising  estates  was  im- 
posed upon  the  county  treasurers.  By  these  changes  the  ex- 
pense of  collecting  the  inheritance  tax  was  reduced  from 
12.2  per  cent  in  1899  to  6.4  per  cent  in  1902. 

In  some  states  the  tax  is  payable  to  the  county  treasurers 
or  collectors  (to  the  registers  of  wills  in  Pennsylvania  and 
Maryland),  in  other  cases  directly  to  the  state  treasury.     In 

1  Cf.  Carter,  The  Transfer  Tax  Law  of  the  State  of  New  York,  p.  93. 

2  Laws  of  1900,  chap.  658.  ^  Laws  of  1901,  chaps.  173  and  493. 


325]  THE  UNITED  STATES  Icc 

New  York  it  is  payable  to  the  State  Comptroller  in  coun- 
ties having  salaried  appraisers,  and  in  other  cases  to  the 
county  treasurer,  who  is  permitted  to  retain  a  fee  or  com- 
mission of  five  per  cent  on  the  first  $50,000  accounted  for 
each  year,  three  per  cent  on  the  second  $50,000,  and  one  per 
cent  on  any  additional  sum.  Similar  commissions  are  al- 
lowed in  several  other  states.  When  payment  is  made  to 
the  county  treasurer,  duplicate  receipts  are  issued,  one  of 
which  must  be  countersigned  by  the  State  Auditor  or  Comp- 
troller before  it  will  be  received  in  settlement  of  the  execu- 
tor's or  administrator's  accounts ;  this  is  in  order  that  the 
county  officer  may  be  debited  with  the  amount  collected. 
Probate  judges  or  clerks  are  also  required  to  report  at  in- 
tervals on  the  estates  which  have  come  before  them;  but 
as  they  are  sometimes  negligent  in  this  regard,  it  has  been 
found  well  worth  while  to  have  their  records  examined  from 
time  to  time  by  special  agents. 

Executors  and  administrators  are  made  personally  liable 
for  the  payment  of  the  tax,  which  they  are  authorized  to 
deduct  from  individual  legacies,  or  collect  from  the  legatees 
in  the  case  of  specific  legacies.  They  are  also  empowered 
to  sell  as  much  of  the  decedent's  property  as  may  be  neces- 
sary in  order  to  pay  the  tax.  Moreover,  the  tax  is  made  a  lien 
upon  the  property  until  paid ;  though  Maryland  has  recently 
limited  the  lien  to  four  years, ^  in  order  to  avoid  clouding 
titles  indefinitely,  and  five-year  limits  are  found  in  some 
other  states.  District  attorneys  may  be  called  upon  to  sue 
for  any  tax  not  paid  within  a  reasonable  time,  and  in  some 
cases  special  attorneys  may  be  employed.  In  some  states 
the  probate  courts  are  authorized  to  cite  delinquents  to  ap- 
pear and  show  cause  why  the  tax  should  not  be  paid. 

1  Laws  of  1904,  chap.  222. 


CHAPTER  VIII 

LEGAL  THEORIES 

I.   Constitutionality,   Nature,  and  Subject  of  the 

Tax 

The  conslitiitionality  of  the  inheritance  tax  has  been  re- 
peatedly tested  in  the  courts,  and  has  usually  been  sustained. 
Particular  inheritance-tax  acts  have  been  declared  uncon- 
stitutional in  several  instances,  but  nearly  always  because  of 
some  specific  defect,  and  not  because  they  were  unsound  in 
principle.  The  early  statutes  of  Minnesota  and  Wisconsin, 
which  were  annulled  by  the  courts,  imposed  probate  duties 
rather  than  inheritance  taxes  proper,  and  made  payment  a 
condition  precedent  to  the  settlement  of  the  estate.  In  both 
cases  the  state  claimed  that  the  exaction  was  a  fee,  but  the 
courts  held  it  to  be  a  tax.  The  Minnesota  Supreme  Court 
held  that  the  act  violated  a  clause  in  the  bill  of  rights  to  the 
effect  that  every  person  "  ought  to  obtain  justice  freely,  and 
without  purchase ;  completely,  and  without  denial ;  promptly 
and  without  delay,  conformably  to  the  laws."  Said  the 
court : 

Suitors  in  this  (probate)  court  of  exclusive  jurisdiction 
should  not  be  required  to  pay,  as  a  condition  to  their  suits  be- 
ing entertained,  a  tax  measured  by  the  value  of  the  property, 
and  without  regard  to  the  nature  or  extent  of  the  judicial  pro- 
ceedings which  may  be  invoked  or  become  necessary. 

Moreover,  it  was  held  that  the  act  violated  the  rule  of 
156  [3-'6 


327]  LEGAL  THEORIES  I -7 

equality  of  taxation  by  the  exemption  of  small  estates  and 
by  an  arbitrary  and  unequal  schedule/ 

In  the  Wisconsin  case  the  tax  was  declared  unconstitu- 
tional primarily  because  it  applied  only  to  one  county;  yet 
the  court  intimated  that  it  might  have  been  nullified  either 
as  a  tax  on  judicial  procedure,  as  double  taxation,  or  as  un- 
equal because  of  the  exemption  of  small  estates.  The  court 
distinguished  between  this  tax,  which  it  regarded  as  a  tax. 
upon  the  property  constituting  the  estate,  and  a  succession 
tax  upon  the  transmission  of  the  property.^ 

The  more  recent  Minnesota  statutes  which  have  been 
found  wanting  clearly  violated  the  exacting  provisions  of 
the  constitutional  amendment  permitting  an  inheritance 
tax;^  while  in  Michigan  and  Missouri  the  original  acts 
failed  to  observe  the  constitutional  requirements  relative  to 
the  application  of  the  proceeds.  ^  New  Hampshire  is  the 
only  state  in  which  an  inheritance  tax  has  been  declared 
unconstitutional  for  reasons  which  might  apply  to  such 
taxes  in  general.  ^  Justice  Blodgett,  in  delivering  the  opin- 
ion of  the  court,  conceded  that  in  the  absence  of  constitu- 
tional prohibition  the  legislature  would  have  had  power  to 
impose  the  tax,  but  held  that  the  exemption  of  certain  rela- 
tives and  the  taxation  of  all  others  violated  two  provisions 
of  the  state  constitution :  that  which  limited  the  power  of 
levying  taxes  to  "  proportional  and  reasonable  assessments, 
rates,  and  taxes  upon  all  the  inhabitants  and  residents  within 
the  said  state,  and  upon  the  estates  within  the  same,"  and 
the  clause  of  the  bill  of  rights  declaring  every  inhabitant 
to  be  bound  to  contribute  his  share.     He  considered  it  im- 

1  State  vs.  Gorman,  40  Minn.  232;  41  N.  W.  948.     See  p.  119,  supra. 

2  State  vs.  Mann.  76  Wis.  469;  45  N.  W.  Rep.  526.     See  p.  116,  supra. 

3  See  pp.  120-122.  supra.  *  See  pp.  139,  141,  supra. 
s  Curry  vs.  Spencer,  61  N.  H.  624. 


158  THE  INHERITANCE  TAX  [328 

material  whether  the  tax  was  on  property  or  on  a  civil  right 
or  privilege,  for  the  same  principle  of  equality  and  due  pro- 
portion applied  to  every  species  of  tax.  In  this  respect  he 
distinguished  between  the  New  Hampshire  constitution 
and  those  of  Virginia  and  Maryland,  under  which  the  in- 
heritance tax  had  been  sustained,  saying  that  the  latter  re- 
quired only  taxes  on  property  to  be  uniform.  The  de- 
cision continues : 

If  it  is  to  be  regarded  as  a  tax  on  property,  it  is  open  to  the 
objection  of  unequal  and  double  taxation,  and  if  it  is  to  be 
regarded  as  a  tax  on  a  civil  right  or  privilege,  it  is  discrimin- 
ating and  disproportional.  Nor  is  the  argument  that  its  object 
is  "  to  defray  the  cost  of  probate  courts  "  entitled  to  any 
weight,  because  the  constitutional  rule  of  equality  cannot  be 
limited  or  qualified  by  any  consideration  of  expediency  or  con- 
venience. The  purpose  of  the  act  cannot  change  its  character 
in  this  respect.  Good  purposes  in  taxation  are  of  no  conse- 
quence if  the  effect  is  to  subject  the  taxpayer  to  exceptional 
and  invidious  exactions.  .  .  .  Under  the  reservations  of  the 
bill  of  rights  and  the  limitations  of  the  constitution,  it  is  plainly 
founded  upon  pure  inequality,  and  is  simply  extortion  in  the 
name  of  taxation ;  and  it  can  therefore  never  be  sustained  in 
this  jurisdiction  so  long  as  equality  and  justice  continue  to  be 
the  basis  of  constitutional  taxation. 

The  distinction  made  in  this  decision  between  the  con- 
stitution of  New  Hampshire  and  those  of  Virginia  and 
Maryland  was  one  which  existed  only  in  the  imagination 
of  the  New  Hampshire  judge;  the  rule  of  uniformity -had 
been  limited  to  the  property  tax  in  Maryland  and  Virginia 
only  by  the  interpretation  of  the  courts.  The  language  of 
the  constitutions  was  rather  more  explicit  than  in  New 
Hampshire.     The  Maryland  constitution  declared 


329]  LEGAL  THEORIES  I-C^ 

that  paupers  ought  not  to  be  assessed  for  the  support  of  the 
government,  but  every  other  person  in  the  state,  or  person 
holding  property  therein,  ouglit  to  contribute  his  proportion  of 
public  taxes  for  the  support  of  government,  according  to  his 
actual  worth  in  real  or  personal  property ;  yet  fines,  duties  or 
taxes  may  properly  and  justly  be  imposed  or  laid,  with  a  polit- 
ical view,  for  the  good  government  and  benefit  of  the  com- 
munity/ 

The  Virginia  constitution  prescribed  as  follows : 

Taxation  shall  be  equal  and  uniform  throughout  the  Com- 
monwealth, and  all  property  other  than  slaves  shall  be  taxed 
in  proportion  to  its  value,  which  shall  be  ascertained  in  such 
manner  as  may  be  prescribed  by  law.- 

The  Virginia  court  stated  in  so  many  words  that  the 
language  used  was  broad  enough  to  cover  everything;  yet 
it  was  held  not  to  invalidate  a  tax  on  a  civil  right  or  privi- 
lege, like  the  inheritance  tax/''  Judge  Lee.  in  delivering 
the  opinion  of  the  court,  said : 

I  do  not  perceive  wherein  the  inequality  and  want  of  uni- 
formity complained  of  can  be  said  to  consist.  .  .  .  The  tax  is 
equal  and  uniform  throughout  the  state  as  far  as  it  is  suscep- 
tible of  the  application  of  the  rule.  It  is  the  same  everywhere 
upon  the  succession  to  estates  of  equal  value  of  whatever  sub- 
jects they  may  consist. 

Nor  was  the  exemption  of  small  estates  considered  a  vio- 
lation of  the  rule  of  uniformity : 

The  legislature  may  define  the  class  to  which  this  tax  shall 
be  restricted  as  they  in  their  discretion  may  think  just  and 

1  Constitutions  of  1864  and  1867,  Declaration  of  Rights,  art.   15. 

2  Constitution  of  1851,  art.  iv,  §  22. 

s  Eyre  vs.  Jacob,  1858,  14  Grat.  422. 


l6o  THE  INHERITANCE  TAX  [330 

proper,  taking  care  to  render  it  uniform  with  all  those  who 
constitute  the  class ;  or  as  they  are  authorized  to  exempt  any 
particular  subject  from  taxation,  it  may  be  regarded  as  an 
exemption  in  favor  of  those  entitled  to  inconsiderable  estates 
of  less  value  than  the  sum  named. 

In  like  manner  the  Maryland  Court  of  Appeals  decided 
that  while  providing  for  a  uniform  mode  of  taxation  on 
property,  it  was  not  the  purpose  of  the  framers  of  the  con- 
stitution to  prohibit  any  other  species  of  taxation/ 

In  North  Carolina,  also,  the  Supreme  Court  denied  that 
the  inheritance  tax  violated  the  constitutional  provision  re- 
quiring all  property  to  be  taxed  uniformly,  and  limiting 
the  rate  of  state  taxation.-     Said  the  court : 

Undoubtedly  if  the  tax  in  question  must  necessarily  be  re- 
garded as  a  tax  on  property,  the  objection  would  be  irresistible, 
since  this  property  is  not  only  taxed  uniformly  with  other 
property,  but  is  subjected  to  taxation  as  a  legacy  in  addition. 
But  we  do  not  regard  the  tax  in  question  as  a  tax  on  property, 
but  rather  as  a  tax  imposed  on  the  succession,  on  the  right  of 
the  legatee  to  take  un^ler  the  v/ill,  or  of  a  collateral  distribu- 
tion in  the  case  of  intestac}'.  ...  Is  there  any  reason  why  the 
State  shall  be  denied  the  power  to  tax  a  succession  whether  it 
be  by  gift  inter  vivos,  or  by  will  or  intestacy?  Property  itself 
as  well  as  the  succession  to  it  is  the  creature  of  positive  law. 
The  legislative  power  declares  what  objects  in  nature  may  be 
held  as  property ;  it  provides  by  what  forms  and  on  v\^hat  con- 
ditions it  may  be  transmitted  from  one  person  to  another ;  it 
confines  the  right  of  inheriting  to  certain  persons  wdiom  it  de- 
fines heirs,  and  on  the  failure  of  such  it  takes  the  property  to 
the  State  as  an  escheat. 

The  right  to  give  or  take  property  is  not  one  of  those  natural 
and  inalienable  rights  which  are  supposed  to  precede  all  gov- 

1  Tyson  vs.  State,  1868,  28  Md.  577. 

2  Pullen  vs.  Commissioners,  66  N.  C.  361. 


33 1 ]  LEGAL  THEORIES  l6l 

eminent,  and  which  no  government  can  rightfully  impair. 
There  was  a  time,  at  least  as  to  gift  by  will,  it  did  not  exist ; 
and  there  may  be  a  time  again  when  it  will  seem  wise  and  ex- 
pedient to  deny  it.  These  are  the  uncontested  powers  of  the 
Legislature  upon  which  no  article  of  the  Constitution  has  laid 
its  hands  to  impair  them.  If  the  Legislature  may  destroy  this 
right,  may  it  not  regulate  it?  May  it  not  impose  conditions 
upon  its  exercise?  And  the  condition  it  has  imposed  in  this 
case  is  a  tax. 

In  these  remarks  on  the  legislative  power  over  the  right 
of  bequest  the  North  Carolina  court  followed  that  of  Vir- 
ginia, wdiich  had  declared  in  Eyre  vs.  Jacob  that  the  right 
to  take  property  by  devise  or  descent  being  the  creature  of 
the  law,  the  legislature  might  restrict  it,  impose  conditions 
upon  it,  or  absolutely  repeal  the  statutes  of  wills  and  de- 
scents and  apply  the  property  of  decedents  to  public  uses. 

The  constitutionality  of  the  New  York  tax  was  upheld 
by  the  Court  of  Appeals  in  1887.^  It  had  been  argued 
against  it  that  bequest  and  inheritance  were  purely- 
natural  and  absolute  rights,  and  not  specially  taxable;  that 
the  tax  was  not  equal  and  uniform,  but  arbitrary,  unjustly 
discriminating  between  citizens;  that  the  law  did  not  dis- 
tinctly state  the  object  to  which  the  tax  was  to  be  applied; 
that  it  did  not  provide  for  a  legal  apportionment  of  the  tax ; 
that  it  conferred  upon  the  surrogates  powers  and  duties  not 
authorized  by  the  constitution ;  that  due  process  of  law  was 
wanting  in  that  the  tax-payers  were  not  given  sufficient 
notice  or  opportunity  to  be  heard ;  and  that  the  provision 
for  the  taxation  of  future  and  contingent  estates  was  op- 
pressive and  unconstitutional. 

In  this  case  it  was  not  determined  whether  the  tax  in 
question  was  a  tax  on  property  or  on  the  devolution  of 
property : 

1  Matter  of  McPherson,  104  N.  Y.  306. 


1 62  l^i-iE  INHERITANCE  TAX  [332 

In  either  case  it  is  a  special  tax.  In  the  one  case  it  is  a  tax 
upon  the  particular  class  of  property,  and  in  the  other  case  a 
tax  upon  succession  or  devolution  of  property,  or  the  right 
to  receive  property  in  the  cases  mentioned  in  the  statute. 
Whether  it  be  one  or  the  other,  it  is  free  from  constitutional 
objection.  It  has  never  been  questioned  that  the  legislature 
can  impose  a  tax  upon  all  sales  of  property,  upon  all  incomes, 
upon  all  acquisitions  of  property,  upon  all  business  and  upon 
all  transfers.  Taxes  of  a  similar  character  were  quite  exten- 
sively imposed  by  the  acts  of  Congress  passed  during  the  late 
civil  war.  If  this  be  regarded  as  a  tax  upon  property,  then  it 
is  free  from  constitutional  objection  if  it  be  equally  imposed 
and  properly  apportioned  upon  all  the  property  of  the  class  to 
which  it  belongs. 

The  general  rule  regarding  the  nature  and  sanction  of 
inheritance  taxes  is  well  stated  by  the  Supreme  Court  of 
Tennessee  in  sustaining  the  inheritance  tax  of  that  state : 

Upon  general  principles,  the  right  to  tax  the  succession  or 
inheritance  of  property  is  founded  on  a  reasonable  basis,  since 
the  right  of  any  person  to  succeed  to  property  of  a  deceased 
person,  whether  by  will  or  inheritance,  is  a  creature  of  statute 
law.  ...  As  the  right  to  succeed  depends  upon  the  law  of  the 
state,  it  follows  that  the  state  may  regulate  that  right  as  public 
necessity  or  policy  may  dictate,  and  may  subject  it  to  such 
burdens  and  reasonable  conditions  as  may  best  subserve  the 
purposes  of  the  state.  It  must  be  borne  in  mind  that  the  tax 
is  not  upon  the  property,  but  the  right  or  privilege  of  acquir- 
ing it  by  succession.^ 

1  State  vs.  Alston,  94  Tenn.  674 ;  30  S.  W.  750.  See  also  State  vs. 
Hamlin,  86  Me.  495;  Gelsthorpe  vs.  Furnell,  20  Mont.  299;  In  re  Wil- 
merding,  117  Cal.  281;  State  vs.  Clark,  30  Wash.  439;  Union  Trust  Co. 
vs.  Probate  Judge,  125  Mich.  487;  Estate  of  Magnes,  32  Colo.  527; 
State  vs.  Vinsonhaler  (Neb.),  105  N.  W.  472;  Morris'  Estate,  138  N.  C. 
259 ;  Hickok's  Estate,  78  Vt.  259. 


^^^]  LEGAL  THEORIES  1 5^ 

The  Supreme  Court  of  Wisconsin,  in  sustaining  the  Wis- 
consin act  of  1903,  follows  the  Supreme  Court  of  Massa- 
chusetts in  rejecting  the  theory  that  the  legislature  might 
aholish  inheritance  and  bequest,  but  justifies  the  taxation 
of  inheritances  "  under  the  power  of  reasonable  regulation 
and  taxation  of  transfers  of  property :  ' 

But,  while  we  utterly  reject  the  doctrine  of  Eyre  v.  Jacob, 
14  Grat.  422,  and  hold  that  the  right  to  demand  tliat  property 
pass  by  inheritance  or  will  is  an  inherent  right  subject  only  to 
reasonable  regidation  by  the  legislature,  we  are  not  thereby 
brought  to  the  conclusion  that  inheritance  or  succession  taxes 
cannot  be  levied.  They  do  not  depend  upon  the  right  to  con- 
fiscate. We  agree  entirely  with  the  ideas  expressed  by  the  su- 
preme court  of  Massacliusetts  in  Minot  v.  Winthrop,  162  Mass. 
113,  38  N.  E.  512,  where  it  is  said:  "We  assume  that  under 
the  constitution  this  (i.  e.,  the  taking  of  all  property  by  the 
state  on  the  death  of  the  owner)  cannot  be  done  either  directly 
or  indirectly ;  that  the  legislature  cannot  so  far  restrict  the 
right  to  transmit  property  by  will  or  by  descent  as  to  amount 
to  an  appropriation  of  property  generally ;  that  it  cannot  im- 
pose a  tax  which  shall  be  equivalent  or  almost  equivalent  to 
the  value  of  the  property,  and  cannot  so  limit  the  persons  who 
can  take  as  heirs,  devisees,  distributees,  or  legatees  that  the 
great  mass  of  all  the  property  of  the  inhabitants  must  become 
vested  in  the  commonwealth  by  escheat.  The  state  can  take 
property  by  taxation  only  for  the  public  service,  and  we  assume 
that  its  right  to  take  property,  if  any  exists,  by  regulating  the 
distribution  of  it  on  the  death  of  the  owner  is  limited  in  the 
same  manner,  and  that  this  right  must  be  exercised  in  a  reason- 
able way."  .  .  .  No  one  doubts  for  a  moment  that  a  govern- 
ment may  levy  a  tax  upon  transfers  of  land  or  upon  business 
transactions ;  it  is  done  by  the  federal  government  in  this 
country  whenever  additional  and  extraordinary  revenues  are 
needed,  in  the  form  of  stamp  duties.  These  taxes  are  not 
based   upon    the   power    to    interdict   or   prohibit    such   trans- 

1  Nunnemacher  vs.  State,  129  Wis.  190;   108  N.  W.  62~. 


164  '^HE  INHERITANCE  TAX  [334 

actions,  but  upon  the  power  to  reasonably  regulate  and  tax 
them.  Succession  or  inheritance  taxes  may  ''"ell  be  sustained 
upon  the  same  principle ;  not  upon  the  power  to  prohibit,  but 
upon  the  power  to  reasonably  regulate  and  tax. 

The  distinction  is  perhaps  chiefly  of  academic  interest,  but 
the  question  has  been  argued  by  eminent  counsel  before 
the  Supreme  Court  of  the  United  States,^  and  might  become 
of  practical  importance  if  any  state  should  impose  a  really 
excessive  inheritance  tax. 

The  Louisiana  tax  upon  foreign  heirs  was  sustained  by 
the  United  States  Supreme  Court  as  a  regulation  of  in- 
heritance. ^  The  opinion  of  the  court  was  delivered  by 
Chief  Justice  Taney,  who  said : 

The  law  in  question  is  nothing  more  than  an  exercise  of  the 
power  which  every  state  and  sovereignty  possesses,  of  regulat- 
ing the  manner  and  term  upon  which  property,  real  or  personal, 
within  its  dominion  may  be  transmitted  by  last  will  and  testa- 
ment, or  by  inheritance ;  and  of  prescribing  who  shall  and  who 
shall  not  be  capable  of  taking  it.  Every  state  or  nation  may 
unquestionably  refuse  to  allow  an  alien  to  take  either  real  or 
personal  property,  situated  within  its  limits,  either  as  heir  or 
legatee,  and  may,  if  it  thinks  proper,  direct  that  property  so 
descending  or  bequeathed  shall  belong  to  the  state.  .  .  .  And  if 
a  state  may  deny  the  privilege  altogether,  it  follows  that,  when 
it  grants  it,  it  may  annex  to  the  grant  any  conditions  which  it 
supposes  to  be  required  by  its  interests  or  policy. 

The  levying  of  a  succession  tax  by  the  general  govern- 
ment manifestly  could  not  be  explained  as  a  regulation  of 
inheritance ;  when  the  Civil  War  succession  tax  came  before 
the  Supreme  Court  it  was  interpreted  as  an  exercise  of  the 
taxing  power :  ^ 

It   is  plainly  an  excise  tax  or  duty,  authorized  by  section, 

J  See  p.  174,  infra.  -  Mager  vs.  Grima,  8  How.  490. 

3  Scholey  vs.  Rew,  23  Wall.  331. 


335 J  LEGAL  THEORIES  id- 

eight  of  article  one,  which  vests  the  power  in  Congress  to  lay 
and  collect  taxes,  duties,  imposts,  and  excises. 

It  was  held  not  to  be  a  direct  tax  within  the  meaning  of 
the  Constitution,  nor  a  tax  on  the  land  itself : 

The  succession  or  devolution  of  the  real  estate  is  the  subject- 
matter  of  the  tax  or  duty,  or,  in  other  words,  it  is  the  right  to 
become  the  successor  of  real  estate  upon  the  death  of  the  pre- 
decessor; .  .  .  nor  is  the  question  affected  in  the  least  by  the 
fact  that  the  tax  or  duty  is  made  a  lien  upon  the  land,  as  the 
lien  is  merely  an  appropriate  regulation  to  secure  the  collec- 
tion of  the  exaction. 

The  only  constitutional  question  before  the  court  in  this 
case  was  whether  the  succession  tax  was  a  direct  tax  or  an 
excise;  but  the  Federal  inheritance  tax  imposed  in  1898  was 
attacked  on  more  fundamental  grounds,  eminent  counsel  ar- 
guing that  as  the  power  to  regulate  succession  was  lodged 
solely  in  the  states,  Congress  was  without  authority  to  tax 
the  transmission  or  receipt  of  property  at  death.  The  Su- 
preme Court,  however,  denied  that  the  state's  power  of  re- 
gulation was  what  was  taxed : 

But  the  fallacy  which  underlies  the  proposition  contended 
for  is  the  assumption  that  the  tax  on  the  transmission  or  re- 
ceipt of  property  occasioned  by  death  is  imposed  on  the  exclu- 
sive power  of  the  State  to  regulate  the  devolution  of  property 
upon  death.  The  thing  forming  the  universal  subject  of  taxa- 
tion upon  which  inheritance  and  legacy  taxes  rest  is  the  trans- 
mission or  receipt,  and  not  the  right  existing  to  regulate.  In 
legal  effect,  then,  the  proposition  upon  which  the  argument 
rests  is  that  wherever  a  right  is  subject  to  exclusive  regula- 
tion, by  either  the  government  of  the  United  States  on  the 
one  hand  or  the  several  States  on  the  other,  the  exercise  of 
such  rights  as  regulated  can  alone  be  taxed  by  the  government 
having  the   mission   to  regulate.      But  when   it  is  accurately 


1 66  't'HE  INHERITANCE  TAX  [336 

stated,  the  proposition  denies  the  authority  of  the  States  to 
tax  objects  which  are  confessedly  within  the  reach  of  their 
taxing  power,  and  also  excludes  the  National  government  from 
almost  every  subject  of  direct  and  many  acknowledged  objects 
of  indirect  taxation.  Thus  imports  are  exclusively  within  the 
taxing  power  of  Congress.  Can  it  be  said  that  the  property 
when  imported  and  commingled  with  the  goods  of  the  State 
cannot  be  taxed,  because  it  had  been  at  some  prior  time  the 
subject  of  exclusive  regulation  by  Congress?  Again,  inter- 
state commerce  is  often  within  the  exclusive  regulating  power 
of  Congress.  Can  it  be  asserted  that  the  property  of  all  per- 
sons or  corporations  engaged  in  such  commerce  is  not  the 
subject  of  taxation  by  the  several  States,  because  Congress 
may  regulate  interstate  commerce?  Conveyanses,  mortgages, 
leases,  pledges,  and,  indeed,  all  property  and  the  contracts 
which  arise  from  its  ownership,  are  subject  more  or  less  to 
state  regulation,  exclusive  in  its  nature.  If  the  proposition 
here  contended  for  be  sound,  such  property  or  dealings  in  re- 
lation thereto  cannot  be  taxed  by  Congress,  even  in  the  form 
of  a  stamp  duty.  It  cannot  be  doubted  that  the  argument, 
when  reduced  to  its  essence,  demonstrates  its  own  unsound- 
ness, since  it  leads  to  the  necessary  conclusion  that  both  the 
National  and  state  governments  are  divested  of  those  powers 
of  taxation  which  from  the  foundation  of  the  government  ad- 
mittedly have  belonged  to  them.  Certainly,  a  tax  placed  upon 
an  inheritance  or  legacy  diminishes,  to  the  extent  of  the  tax, 
the  value  of  the  right  to  inherit  or  receive,  but  this  is  a  burden 
cast  upon  the  recipient  and  not  upon  the  power  of  the  State  to 
regulate.  .  .  .  Under  our  constitvitional  system  both  the  Na- 
tional and  state  governments,  moving  in  their  respective  orbits, 
have  a  common  authority  to  tax  many  and  diverse  objects,  but 
this  does  not  cause  the  exercise  of  its  lawful  attributes  by  one 
to  be  a  curtailment  of  the  powers  of  government  of  the  other, 
for  if  it  did  there  would  practically  be  an  end  of  the  dual 
system  of  government  which  the  Constitution  established.^ 

1  Knowlton  vs.  Moore,  178  U.  S.  41,  59,  60. 


^^y]  LEGAL  THEORIES  iQy 

As  regards  the  character  of  inheritance  taxes  the  Su- 
preme Court  of  Pennsylvania  is  at  variance  with  all  the 
other  authorities.  In  one  case  the  fact  that  the  tax  was  a 
lien  on  real  estate  was  made  the  basis  for  the  opinion  that  it 
was  a  tax  upon  the  property  itself,  a  direct  tax  upon  the 
thing  devised.^  But  although  the  point  was  argued  by 
counsel,  this  opinion  was  not  essential  to  the  decision  of  the 
case,  and  it  is  therefore  to  be  regarded  as  dictum;  though  it 
was  followed  by  the  same  court  in  its  opinion  annulling 
the  direct-inheritance  tax.-  Of  the  statute  declared  uncon- 
stitutional in  that  case  the  court  said : 

That  it  is  an  act  imposing  taxes  on  the  personal  property 
therein  specified  is  too  plain  for  discussion.  To  hold  other- 
wise would  be  a  perversion  of  the  plain  meaning  of  the  words 
employed. 

The  better  and  more  authoritative  view,  however,  is  that 
which  regards  the  tax  as  a  condition  of  inheritance,  or  a 
tax  on  a  civil  privilege,  and  not  on  the  property  trans- 
ferred. An  important  consequence  of  the  prevailing  view 
on  this  point  is  that  the  tax  is  payable  upon  the  devolution 
of  government  bonds.  The  Pennsylvania  Supreme  Court 
arrived  at  this  conclusion  by  the  following  argument,  many 
years  before  expressing  the  seemingly  inconsistent  views 
quoted  above: 

This  five  per  cent  tax  is  one  of  the  conditions  of  adminis- 
tration, and  to  deny  the  right  of  the  state  to  impose  it,  is  to 
deny  the  right  of  the  state  to  regulate  the  administration  of 
decedents'  goods.  .  .  .  The  act  operates  on  the  residue  of  the 
estate  after  paying  debts  and  charges,  and,  theoretically,  that 
residue  is  always  a  balance  in  money.      The  administration- 

^  Biltinger's  Estate,  129  Pa.  s^S.  -  Cope's  Estate.  191  Pa.  i. 


1 68  THE  INHERITANCE  TAX  [338 

account  always  exhibits  a  balance  in  cash,  not  in  specific  goods, 
whether  bonds  or  horses;  and  though  an  heir  may  take  bonds 
or  horses  as  cash,  the  account  must  show,  and  always  does 
show,  a  cash  balance.  That  is  the  fund  taxed  by  this  law,  and 
not  the  bond  or  other  chattels  which  may  have  produced  the 
fund.^ 

In  New  York  a  United  States  circuit  court  came  to  the 
same  conclusion,  declaring  that 

the  tax  is  not  imposed  upon  the  bonds,  but  is  one  upon  the 
privilege  of  acquiring  property  by  inheritance.  .  .  .  The  bonds 
are  the  subject  of  the  appraisal,  but  the  privilege  is  the  subject 
of  the  tax.^ 

The  United  States  Supreme  Court  has  confirmed  these 
decisions,  even  holding  that  government  bonds  are  subject 
to  inheritance  taxes,  state  ^  and  Federal,'*  notwithstanding 
clauses  in  the  statutes  and  on  the  face  of  the  bonds  declaring 
them  exempt  from  "  all  taxes  or  duties  of  the  United  States, 
as  well  as  from  taxation  in  any  form  by  or  under  state, 
municipal  or  local  authority."  State  and  municipal  bonds 
are  also  subject  to  inheritance  taxes,  though  exempt  from 
other  taxation.""' 

Another  interesting  corollary  of  the  same  or  a  very  simi- 
lar principle  is  that  a  state  may  even  tax  bequests  to  the 
United  States.  William  W.  Merriam,  a  resident  of  Suf- 
folk County,  New  York,  having  bequeathed  all  his  estate  to 
the  United  States  government,  the  Supreme  Court  of  the 
United  States  held  that,  the  New  York  inheritance  tax  being 
not  upon  the  property  but  upon  the  right  to  dispose  of  it, 

1  Strode  vs.  Commonwealth,  52  Pa.  181. 
-  Wallace  vs.  Myers,  38  Fed.  Rep.  184. 
8  Plummer  vs.  Coler,  178  U.  S.  115. 

*  Murdock  vs.  Ward,  178  U.  S.  139. 

2  Orr  vs.  Gilman,  183  U.  S.  278,  289;  Succession  of  Kohn,  115  La.  71. 


339]  LEGAL  THEORIES  l6r) 

the  act  in  question  is  not  open  to  the  objection  that  it  is  an 
attempt  to  tax  the  property  of  the  United  States,  since  the  tax 
is  upon  the  legacy  before  it  reaches  the  hands  of  the  Govern- 
ment. The  legacy  becomes  the  property  of  the  United  States 
only  after  it  has  suffered  a  diminution  to  the  amount  of  the 
tax,  and  it  is  only  upon  this  condition  that  the  legislature 
assents  to  a  bequest  of  it.^ 

In  like  manner,  the  National  inheritance  tax  was  declared 
applicable  to  legacies  to  states  or  their  municipalities.^ 

Whether  an  inheritance  tax  will  be  regarded  as  a  tax  on 
the  right  of  testators  to  dispose  of  their  property  by  will  or 
a  tax  on  the  right  of  heirs  to  receive  property  by  will  or 
inheritance  will  depend  to  some  extent  upon  the  provisions 
of  the  particular  statute,^  though  the  latter  explanation  is 
the  one  usually  preferred  by  the  courts.* 

With  regard  to  the  general  nature  of  the  inheritance  tax 
three  legal  questions  may  be  said  to  be  fairly  well  settled  : 
(i)  Such  a  tax  is  not  prohibited  by  constitutional  require- 
ments of  equality  and  uniformity  of  taxation;  (2)  it  may 
be  imposed  as  an  exercise  either  of  the  taxing  power  or  of 
the  power  to  regulate  inheritance,  and  hence  by  either  Na- 
tional or  state  governments,  or  by  both;  (3)  it  is  not  a 
tax  on  the  property  transferred. 

II.  Legality  of  Progressive  Rates 
Whether  an  inheritance  tax  may  be  levied  according  to 
a  progressive  scale  is  a  question  that  has  been  answered 
differently  in  different  states.  The  Ohio  direct-inheritance 
tax  of  1894  was  declared  unconstitutional  by  the  Supreme 
Court  of  that  state,  partly  by  reason  of  the  progressive 
schedule.     The  chief  contention   of  counsel   in   opposition 

1  United  States  vs.  Perkins,  163  U.  S.  625. 

2  Snyder  vs.  Bettman.  190  U.  S.  49. 

3  Minot  vs.  Winthrop,  162  Mass.  113. 

*  State  vs.  Alston,  94  Tenn.  674;  Gelsthorpe  vs.  Furnell.  20  Mont.  299. 


lyo  THE  INHERITANCE  TAX  [340 

to  the  tax  was  that  it  was  a  tax  on  property,  and  hence  in 
violation  of  a  constitutional  provision  directing-  that  laws 
should  be  passed  taxing  by  a  uniform  rule  all  property  ac- 
cording- to  its  true  value  in  money.  The  court  held  that 
the  tax  was  not  one  on  property,  but  was  on  the  right  or 
privilege  of  succession,  and  hence  was  not  inconsistent  with 
the  above-mentioned  clause  of  the  constitution;  but  both 
the  progressive  scale  and  the  exemption  of  $20,000  were 
held  to  be  in  conflict  with  the  following  section  of  the  bill 
of  rights : 

All  political  power  is  inherent  in  the  people.  Government  is 
instituted  for  their  equal  protection  and  benefit. 

These  political  generalities  seem  at  first  sight  so  irrel- 
evant to  the  question  at  issue  that  it  is  interesting  to  fol- 
low the  reasoning  of  the  court : 

If  government  is  instituted  for  the  equal  protection  and 
benefit  of  the  people,  it  follows  that  laws  wliich  are  passed 
under  a  government  so  instituted  must  likewise  be  for  the 
equal  protection  and  benefit  of  the  people.  This  statute  fails 
to  protect  equally  the  people  who  exercise  the  right  and  privi- 
lege of  receiving  or  succeeding  to  property.  The  right  to  re- 
ceive the  first  twenty  thousand  dollars  of  an  estate  not  exceed- 
ing that  sum  is  protected  from  taxation,  while  the  right  to  re- 
ceive the  first  twenty  thousand  dollars  of  an  estate  exceeding 
that  sum  is  taxed  the  sum  of  two  hundred  dollars.  This  is 
not  equal  protection.  Again,  the  right  to  receive  fifty  thou- 
sand dollars'  worth  of  property  of  an  estate  not  exceeding 
that  sum  is  taxed  five  hundred  dollars,  while  the  right  to  re- 
ceive fifty  thousand  dollars  of  an  estate  exceeding  that  sum  is 
[taxed]  seven  hundred  and  fifty  dollars.  This  is  not  equal 
protection.  The  same  may  be  said  of  the  other  gradations 
provided  for  in  the  statute. 

The  right  or  privilege  of  receiving  or  succeeding  to  property 
is  valuable  in  proportion  to  the  value  of  the  thing  received.  It 
cannot  be  consistently   said  that  the  right  to  receive  twenty 


341 J  LEGAL  THEORIES  I7I 

thousand  dollars  is  of  no  value,  and  thai  the  right  to  receive 
twenty  thousand  and  one  dollars  is  of  the  value  of  two  hun- 
dred dollars  and  one  cent. 

Again,  he  who  uses  the  right  or  privilege  of  receiving  prop- 
erty of  the  value  of  twenty  thousand  and  one  dollars,  and  pays 
therefor  a  tax  of  two  hundred  dollars  and  one  cent,  is  not 
equally  benefited  for  the  tax  paid,  as  he  who  uses  the  same 
right  or  privilege  of  receiving  property  of  the  value  of  twenty 
thousand  dollars,  without  paying  any  tax  whatever  for  the  use 
of  such  right.  The  exemption  of  twenty  thousand  dollars  and 
the  increase  of  the  per  cent  as  the  value  of  the  estate  increases 
renders  this  statute  unconstitutional. 

Our  constitution  requires  equality  in  our  tax  laws,  and  also 
equality  in  their  execution  as  near  as  may  be.  The  only  ex- 
emption allowed,  as  to  taxation  of  property,  is  personal  prop- 
erty to  the  amount  of  two  hundred  dollars  to  each  individual, 
and  certain  other  property  devoted  to  public  or  charitable  uses. 
Two  hundred  dollars  in  value  to  each  individual  is  the  extent 
to  which  the  legislature  has  the  power  to  exempt  personal 
property  from  taxation.  The  constitution  must  be  regarded 
as  consistent  with  itself  throughout,  and  as  section  2,  of  article 
12,  permits  an  exemption  from  taxation  of  personal  property 
not  exceeding  two  hundred  dollars,  a  construction  of  section  2 
of  the  bill  of  rights  is  thereby  evinced  to  the  effect  that  in  the 
taxation  of  subjects  other  than  property,  an  exemption  up  to 
two  hundred  dollars  in  value  would  be  regarded  as  for  the 
equal  protection  and  benefit  of  the  people.  The  exemption 
must  be  equally  for  all,  and  the  rate  per  cent  must  be  the  same 
on  all  estates.  There  can  be  no  discrimination  in  favor  of  the 
rich  or  poor.^ 

The  court  declined  to  discuss  the  provisions  of  the  Four- 
teenth Amendment  to  the  Federal  constitution  in  this  con- 
nection,  saying  that  they  w^ere  no  broader  than  the  sec- 
tion of  the  state  bill  of  rights  above  quoted.     It  will  be 
1  State  vs.  Ferris,  53  O.  St.  314. 


172  THE  INHERITANCE  TAX  [342 

noticed  that  the  court  emphasized  the  inequalities  result- 
ing from  the  particular  mode  of  exemption  and  progression 
under  consideration,  rather  than  the  inequality  of  progres- 
sive taxation  in  general.  If  the  first  $20,000  of  every  es- 
tate had  been  exempt,  if  the  next  $30,000  had  been  always 
subjected  to  the  lowest  rate,  if  the  next  higher  rate  had  been 
applied  only  to  the  excess  above  $50,000,  and  so  on 
throughout  the  scale,  not  only  would  the  tax  have  been 
much  more  equitable,  but  it  might  also  have  run  the  gaunt- 
let of  the  courts  in  safety.  To  be  sure,  the  court  added 
that  "  the  rate  per  cent  must  be  the  same  on  all  estates," 
and  even  suggested  that  the  constitutional  requirements 
concerning  property  taxes  were  applicable  to  the  matter 
of  exemption,  although  it  had  refused  to  apply  them  to 
thie  matter  of  uniformity,  and  had  expressly  said  "  it  is 
property  and  not  franchises  that  cannot  be  exempted;"  but 
these  dicta  were  not  necessary  to  the  decision  of  the  case, 
and  must  be  regarded  as  obiter. 

The  inheritance  tax  of  Illinois,  though  its  progressive 
scale  was  open  to  the  same  objection  as  in  Ohio,  was  sus- 
tained by  the  Supreme  Court  of  the  state,  with  but  one  dis- 
senting vote  among  seven  justices,  as  an  exercise  of  the 
legislature's  powers  of  regulation  of  inheritance  and  of  clas- 
sification for  purposes  of  taxation.  On  the  first  point  the 
court  said : 

The  right  to  inherit  and  the  right  to  devise  being  dependent 
on  the  legislative  acts,  there  is  nothing  in  the  constitution  of 
this  state  which  prohibits  a  change  of  those  subjects  at  the  dis- 
cretion of  the  law-making  power.  The  law  of  descent  and 
devise  being  the  creation  of  the  statute  law,  the  power  which 
creates  may  regulate,  and  may  impose  conditions  or  burdens 
on  a  right  of  succession  to  the  ownership  of  property  to  which 
there  has  ceased  to  be  an  owner  because  of  death,  and  the 
ownership  of  which  the  state  then  provides  for  by  the  law  of 


343]  LEGAL  THEORIES  jy^ 

descent  or  devise.  The  imposition  of  such  a  condition  or  bur- 
den is  not  a  tax  upon  the  property  itself,  but  on  the  right  of 
succession  thereto.  To  deny  the  right  of  the  state  to  impose 
such  a  burden  or  condition  is  to  deny  the  right  of  the  state  to 
regulate  the  administration  of  a  decedent's  estate.^ 

But  it  was  claimed  in  opposition  to  the  law  that  it  con- 
flicted with  a  provision  of  the  state  constitution  declaring 
that  "  the  general  assembly  shall  have  power  to  tax  .  .  . 
persons  or  corporations  owning  or  using  franchises  and 
privileges,  in  such  manner  as  it  shall  from  time  to  time  di- 
rect by  general  law,  uniform  as  to  the  class  upon  which  it 
operates."     As  to  this  the  court  said: 

That  statute  provides  that  certain  classes  of  property  which 
were  a  part  of  an  estate  shall  be  exempt  from  taxation  under 
these  provisions,  and  when  the  legislature  provides  other  classes 
of  property,  some  of  which  shall  pay  $i  per  $100,  others  $2, 
others  $3,  and  others  $4,  and  still  others  $5,  and  again  others 
$6  per  $100,  six  different  classes  are  created,  under  and  by 
which  a  tax  is  levied  by  valuation  on  the  right  of  succession  to 
a  separate  class  of  property The  broad  principle  pre- 
sented is  that  the  legislature  may  create  new  classes  of  prop- 
erty with  reference  to  estates,  under  which  they  may  regulate 
the  right  to  inherit  or  devise,  or  take  under  devise. 

The  constitutionality  of  the  tax  was  called  in  question 
also  in  two  cases  tried  in  the  Circuit  Court  of  the  United 
States  for  the  Northern  District  of  Illinois,  and  this  tri- 
bunal followed  the  State  Supreme  Court  in  refusing  to  de- 
clare the  act  unconstitutional.  All  three  of  these  cases 
were  taken  together  to  the  United  States  Supreme  Court 
for  a  final  determination  of  the  question  whether  the  act 
was  in  violation  of  the  Fourteenth  Amendment  to  the 
Federal  constitution.  It  was  claimed  that  by  this  act,  with 
1  Kochersperger  vs.  Drake,  167  III.  122. 


i;74  I^HE  INHERITANCE  TAX  [^^^ 

its  progressive  rates  and  nnusnally  large  exemptions,  the 
State  of  Illinois  denied  to  persons  within  its  jurisdiction 
the  equal  protection  of  the  laws,  deprived  persons  of  prop- 
erty without  due  process  of  law,  and  abridged  the  privileges 
and  immunities  of  citizens  of  the  United  States.  The  case 
against  the  tax  was  ably  argued  by  Mr.  William  D.  Guthrie, 
of  New  York  City,  and  by  ex-President  Plarrison.  The 
arguments  in  support  of  the  law  were  by  Mr.  Edward  C. 
Akin,  Attorney-General  of  Illinois,  and  Mr.  T.  A.  Moran. 

Mr.  Guthrie  urged  the  injustice,  arbitrary  character,  and 
bad  public  policy  of  progressive  taxation,  and  said:  "If 
the  legislatures  are  free  to  impose  progressive  taxes,  the 
security  of  property  is  gone.  Concede  the  principle  of  pro- 
gression, and  there  is  no  limit  to  the  injustice  a  legislature 
may  commit  upon  the  minority." 

Mr.  Harrison's  argument  was  less  convincing  than  his 
colleague's.  His  was  a  difficult  task,  for  he  undertook  to 
establish  two  propositions  in  the  face  of  repeated  opinions, 
both  of  state  courts  and  of  the  tribunal  before  which  he 
was  arguing.  These  points  were :  ( i )  That  the  tax  in 
question  was  a  property  tax  rather  than  a  tax  on  the  privi- 
lege of  inheritance,  and  (2)  that  the  rights  of  inheritance 
and  of  testamentary  disposition  were  natural  rights  not 
proceeding  from  the  legislature,  and  beyond  the  power  of 
the  legislature  to  take  away.  "  When  they  cease  to  be  re- 
cognized as  natural  and  fundamental  rights,"  he  said  at 
the  close  of  his  peroration,  "  we  shall  have  dissolved  the 
basis  on  which  society  rests."  The  Supreme  Court  had 
within  two  years  expressed  the  contrary  opinions  on  both 
these  points,  even  deciding  that  a  state  could  tax  a  legacy 
to  the  United  States  because  the  tax  was  a  limitation  of 
the  testamentary  power  and  not  a  tax  on  property.^     The 

^  United  States  vs.  Perkins,  163  U.  S.  625. 


345]  LEGAL  THEORIES  1 75 

court  in  its  opinion  '  cited  this  (lecision  and  many  others 
of  similar  purport,  without  manifesting  any  inchnation  to 
reverse  them;  but  a  determination  of  these  points  was  not 
strictly  necessary  to  the  decision  of  the  case.  The  real 
basis  of  the  decision  was  simply  the  principle  that  progres- 
sive taxation  and  generous  exemptions  are  not  in  violation 
of  the  rule  of  equality  in  the  Fourteenth  Amendment.  Said 
the  court : 

That  rule  does  not  require,  as  we  have  seen,  exact  equality 
of  taxation.  It  only  requires  that  the  law  imposing  it  shall 
operate  on  all  alike  under  the  same  circumstances.  The  tax  is 
not  on  money ;  it  is  on  the  right  to  inherit ;  and  hence  a  con- 
dition of  inheritance,  and  it  may  be  graded  according  to  the 
value  of  that  inheritance.  The  condition  is  not  arbitrary  be- 
cause it  is  determined  by  that  value ;  it  is  not  unequal  in  opera- 
tion because  it  does  not  levy  the  same  percentage  on  every 
dollar ;  does  not  fail  to  treat  "  all  alike  under  like  circum- 
stances and  conditions,  both  in  the  privilege  conferred  and  the 
liabilities  imposed."  ' 

The  opinion  was  delivered  by  Mr.  Justice  McKenna  on 
April  25,  1898,  and  was  among  the  first  Supreme  Court 
opinions  from  his  pen.  There  was  but  one  dissent  from  the 
opinion  of  the  majority,  and  that,  curiously  enough,  was  by 
Mr.  Justice  Brewer,  who  was  known  to  have  expressed  him- 
self in  favor  of  graduated  inheritance  taxes,  as  tending  to 
prevent  undue  accumulation  of  property.^  But  this,  he 
said  in  effect,  was  not  a  question  of  political  economy,  but 
of  constitutional  limitations. 

1  Magoun  vs.  Illinois  Trust  and  Savings  Bank,  170  U.  S.  283. 
-  The  words  in  quotation  marks  are  from  Hayes  vs.  Missouri.   120 
U.  S.  68. 

3  Dos  Passos,  Lazv  of  Collateral  and  Direct  Inheritance,  Legacy  and 
Succession  Taxes,  p.  2. 


176  THE  INHERITANCE  TAX  [346 

The  importance  of  the  Supreme  Court's  decision  in  the 
Ilhnois  case  Hes  partly  in  the  fact  that  the  same  Hne  of 
reasoning  would  apply  to  progressive  taxation  in  general, 
whether  of  property,  income,  or  the  gross  or  net  receipts  of 
corporations.  It  is  settled  that  progressive  taxation  is  not 
a  denial  of  the  equal  protection  of  the  laws;  and  hereafter 
no  state  court  can  well  annul  a  progressive  tax  because  of 
some  vague  generality  in  the  state  bill  of  rights.  This  is 
recognized  by  the  Wisconsin  Supreme  Court  in  its  recent 
decision  upholding  the  progressive  inheritance  tax  imposed 
in  1903 : 

The  decision  of  the  supreme  court  of  the  United  States  as 
to  the  force  of  the  XlVth  amendment  is  necessarily  conclusive, 
and  as  the  general  equality  guaranties  of  our  own  constitution 
are  substantially  the  equivalent  of  the  equal  protection  of  the 
laws  guaranteed  by  the  XlVth  amendment,  we  are  content  to 
follow  the  decisions  of  the  United  States  supreme  court,  and 
hold  that  the  progressive  feature  does  not  violate  the  consti- 
tution.^ 

III.  The  Law  of  Exemption 

It  would  appear  that  legislatures  are  more  apt  to  violate 
constitutional  rules  regarding  equality  in  granting  and 
withholding  exemptions  than  in  establishing  progressive 
schedules  of  taxation.  It  will  be  remembered  that  the  Ohio 
Supreme  Court's  first  objection  to  the  direct-inheritance 
tax  of  that  state  was  concerned  with  the  injustice  resulting 
from  the  exemption  of  $20,000,  which  might  easily  have 
been  obviated  by  allowing  a  deduction  of  $20,000  from 
every  direct  inheritance,  as  in  the  Illinois  law  which  was 
sustained.  Only  by  interpreting  the  Ohio  decision  as  based 
mainly  on  the  unequal  exemption  can  it  be  reconciled  with 

1  Nunnemacher  vs.  State,  129  Wis.  190. 


347]  LEGAL  THEORIES  1 77 

the  decision  of  the  United  States  Supreme  Court  upholding 
progressive  taxation.  But  as  the  Ohio  Supreme  Court's 
decision  does  not  itself  make  it  clear  just  how  much  weight 
was  attached  to  the  inequality  of  the  exemption,  it  is  per- 
haps worth  while  to  quote  the  opinion  of  the  lower  court  in 
the  same  case.  The  circuit  court  of  Hamilton  County  had 
held  the  tax  unconstitutional  on  the  sole  ground  that  there 
was  an  exemption  of  $20,000  without  a  corresponding  de- 
duction from  the  taxable  estates.  "If  the  statute  exempted 
$20,000  (or  any  other  sum)  of  every  estate  from  taxation," 
said  this  court,  "  it  would,  in  our  judgment,  be  equal  and 
valid,  even  in  imposing  a  graded  tax,  as  it  does."  ^ 

It  may  be  remembered  also  that  two  acts  of  the  legis- 
lature of  Minnesota  have  been  declared  unconstitutional 
partly  because  the  exempt  amount  was  not  deducted  from 
the  value  of  taxable  inheritances ; "  but  the  value  of  these 
cases  as  precedents  is  much  diminished  by  the  direction  of 
the  Minnesota  constitution  that  the  tax  should  be  levied 
on  inheritances  "  above  a  fixed  and  specified  sum."  In 
Tennessee,  where  the  same  objection  was  raised  in  the  case 
of  a  $250  exemption,  the  tax  was  sustained.^ 

The  Pennsylvania  direct-inheritance  tax  was  declared 
unconstitutional  because  of  the  exemption  of  $5000,*  al- 
though that  amount  was  to  be  deducted  from  every  estate; 
but  this  decision  is  wholly  without  authority  in  other  states, 
because  it  was  based  upon  the  Pennsylvania  constitution's 
prohibition  of  exemptions,  and  upon  the  discredited  theory 
that  an  inheritance  tax  is  a  tax  on  property. 

The  Wisconsin  act  of  1899  was  declared  unconstitutional 

1  State  vs.  Ferris,  9  O.  Circ.  Ct.  R.  298. 

2  Drew  vs.  Tifft,  79  Minn.  175;  State  ex  rel.  Frye  vs.  Bazille,  87  Minn. 
500.     See  p.  121.  supra. 

2  State  vs.  Alston.  94  Tenn.  674.  *  Cope's  Estate,  191  Pa.  r. 


lyS  THE  INHERITANCE  TAX  [348 

because  the  exemption  was  made  to  depend  upon  the  value 
of  the  entire  estate,  and  not  upon  that  of  the  separate 
shares  into  which  it  was  divided.  The  statute  was  at- 
tacked by  counsel  as  a  violation  of  a  requirement  of  the  state 
constitution  that  "  the  rule  of  taxation  shall  be  uniform," 
and  also  of  the  rule  of  equal  protection  in  the  Fourteenth 
Amendment  to  the  Federal  Constitution.  Without  deny- 
ing the  legislature's  power  of  classification,  the  court  held 
that  in  this  case  people  in  the  same  class  were  subject  to 
different  rules,  some  being  exempt  and  some  being  taxed, 
in  that  the  act  discriminated  between  persons  receiving 
equal  amounts  from  estates  above  and  below  $10,000  in 
value.     The  court  said  : 

No  rational  distinction  or  difference  can  be  drawn  between 
the  two  legatees  simply  because  the  estates  from  which  their 

legacies  come  are  of  slightly  different  size This  is  not 

the  equal  protection  of  the  laws.^ 

This  decision,  however,  is  at  variance  with  a  decision  of 
the  Massachusetts  Supreme  Court  on  the  same  point,  under 
a  similar  exemption  in  the  Massachusetts  law.  Said  this 
court : 

In  all,  or  nearly  all,  systems  of  taxation  there  are  some  ex- 
emptions;  but  the  objection  here  is  that  estates  whose  value, 
after  payment  of  all  debts,  shall  not  exceed  ten  thousand  dol- 
lars are  exempt,  without  regard  to  the  value  of  the  property 
received  by  the  devisees,  legatees,  heirs,  or  distributees.  It  is 
argued  that  the  excise,  if  upon  the  privilege  of  taking  prop- 
erty by  will  or  descent,  should  be  the  same  whenever  the  privi- 
lege enjoyed  is  the  same  in  kind  and  extent,  whatever  may  be 
the  value  of  the  estate,  and  that  the  exemptions  should  relate 
to  the  value  of  the  property  received  by  those  who  have  the 

1  Black  vs.  State,  113  Wis.  205;  89  N.  W.  522. 


349]  LEGAL  THEORIES  I^t^ 

privilege  of  receiving  it,  and  not  to  the  value  of  the  estate. 
But  the  right  or  privilege  taxed  can  perhaps  be  regarded 
either  as  the  right  or  privilege  of  the  owner  of  the  property  to 
transmit  it  on  his  death,  by  will  or  descent,  to  certain  persons, 
or  as  the  right  or  privilege  of  these  persons  to  receive  the 
property.  The  tax  too  has  some  of  the  characteristics  of  a 
duty  on  the  administration  of  the  estates  of  deceased  persons. 
The  cost  of  administering  small  estates  is  proportionately 
greater  than  that  of  administering  large  ones,  and  this  of  itself, 
particularly  in  intestate  estates,  operates  to  diminish  the 
amounts  received  very  much  as  a  tax  would.  The  statutes  of 
the  dififerent  States  and  nations  which  have  levied  taxes  on 
devises,  legacies,  and  inheritances  have  usually  made  exemp- 
tions, and  these  have  sometimes  related  to  the  value  of  the 
estates,  and  sometimes  to  the  value  of  the  property  received 
by  the  heirs,  devisees,  legatees,  or  distributees.  The  exemp- 
tion in  the  statute  under  consideration  is  certainly  large  as  an 
exemption  of  estates,  but  it  is  peculiarly  within  the  discretion 
of  the  Legislature  to  determine  what  exemptions  should  be 
made  in  apportioning  the  burdens  of  taxation  among  those 
who  can  best  bear  them,  and  we  are  not  satisfied  that  this  ex- 
emption is  so  clearly  unreasonable  as  to  require  us  to  declare 
the  statute  void.^ 

It  thus  appears  that  the  law  of  exemption  is  in  a  very 
unsettled  and  unsatisfactory  condition.  In  order  to  be 
on  the  safe  side,  however,  legislators  Avill  do  well  to  make 
the  exemption  depend  upon  the  value  of  the  separate  in- 
heritances, and  to  tax  only  the  excess  of  each  inheritance 
above  the  exempt  amount. 

One  point  which  may  be  regarded  as  settled  is  that  the 
exemption  of  direct  heirs  or  other  near  relatives  will  not 
render  an  inheritance  tax  void  for  lack  of  uniformitv. 
The  reason   for   upholding  a   discrimination   of  this   kind 

1  Minot  vs.  Winthrop,  162  Mass.  113,  123,  124  followed  in  State  vs. 
Alston,  94  Tenn.  674,  682. 


l8o  THE  INHERITANCE  TAX  [350 

has  been  stated  by  the  Massachusetts   Supreme  Court  as 
follows : 

The  tax  imposed  by  the  statute  we  are  considering  is  said 
to  be  unequal,  because  it  is  not  imposed  upon  all  estates  and 
upon  all  heirs,  devisees,  legatees,  and  distributees.  To  make  a 
distinction  between  collateral  kindred  or  strangers  in  blood  and 
kindred  in  the  direct  line  in  reference  to  the  assessment  of 
such  a  tax,  either  by  exempting  the  kindred  in  the  direct  line 
or  by  imposing  on  collaterals  and  strangers  a  higher  rate  of 
taxation,  has  the  sanction  of  nearly  all  States  which  have 
levied  taxes  of  this  kind.  It  has  a  sanction  in  reason,  for  the 
moral  claim  of  collaterals  and  strangers  is  less  than  that  of 
kindred  in  the  direct  line,  and  the  privilege  is  therefore  greater.^ 

IV.  Domicile  and  Situs 
Some  of  the  most  difficult  legal  problems  in  connection 
with  the  inheritance  tax  are  those  which  arise  from  inter- 
state complications.'  Such  problems  are  by  no  means  pecu- 
liar to  the  inheritance  tax,  yet  in  theory  there  is  probably 
no  other  form  of  taxation  which  leaves  room  for  so  many 
difficulties  of  this  kind.  In  determining  where  an  inherit- 
ance is  to  be  taxed  the  law-makers  may  consider,  besides 
the  location  of  the  property,  the  domicile,  not  of  one  person 
alone,  but  of  either  .the  decedent  or  the  heir,  or  both;  and 
the  jurisdiction  in  which  the  will  is  made,  or  the  estate  set- 
tled, or  even  the  residence  of  the  executors  may  be  taken 
into  consideration.  Of  course  citizenship  may  be  substi- 
tuted for  domicile  as  the  determining  factor,  or  both  may 
be  considered  together.  But  in  the  United  States,  as  a 
rule,  the  only  circumstances  taken  into  consideration  are 

1  Minot  vs.  Winthrop,  162  Mass.  113,  123.  See  also  Hagerty  vs.  State, 
55  O.  St.  613 ;  State  vs.  Henderson,  160  Mo.  190 ;  State  vs.  Clark,  30 
Wash.  439;  Campbell  z's.  California,  200  U.  S.  87. 

2  See  also  Dos  Passos,  Law  of  Collateral  and  Direct  Inheritance, 
Legacy  and  Succession  Taxes,  chap.  4;  45  Albany  Law  Journal,  331. 


35 1  ]  LEGAL  THEORIES  igi 

the  location  of  the  property  and  the  residence  or  domi- 
cile of  the  decedent ;  thus  the  problem  is  practically  the  same 
as  in  the  case  of  the  property  tax.  Louisiana  formerly  had 
a  tax  on  foreign  heirs  alone,  and  Iowa  and  Washington  now 
discriminate  heavily  against  non-resident  aliens  as  collateral 
heirs  or  legatees :  but  no  state  attempts  to  tax  inheritances 
received  by  its  citizens  from  foreign  decedents  unless  the 
property  itself  is  within  the  jurisdiction  of  the  state.  Not  in 
all  points  do  the  various  statutes  agree  so  well.  A  few  apply 
only  to  property  within  the  jurisdiction  of  the  taxing  state, 
disregarding  domicile  altogether ;  ^  but  the  greater  number 
attempt  to  tax  the  devolution  both  of  all  property  within 
the  taxing  state  and  of  all  property  left  by  residents  of  the 
state.  The  attempt  has  been  partially  defeated  by  decisions 
of  the  courts  which  hold  that  devolutions  of  real  estate  situ- 
ated beyond  the  limits  of  the  taxing  state  cannot  be  taxed. ^ 
In  a  case  of  this  kind  decided  by  the  New  York  Court  of 
Appeals  ^  Judge  Gray,  who  delivered  the  opinion  of  the 
court,  argued  as  follows : 

What  has  the  state  done,  in  effect,  by  the  enactment  of  this 
tax  law  ?  It  reaches  out  and  appropriates  for  its  use  a  portion 
of  the  property  at  the  moment  of  its  owner's  decease ;  allow- 
ing only  the  balance  to  pass  in  the  way  desired  by  the  testator, 
or  permitted  by  its  intestate  law,  and  while,  in  so  doing,  it  is 
exercising  an  inherent  and  sovereign  right,  it  seems  very  clear 
to  my  mind  that  it  affects  only  property  which  lies  within  it, 
and,  consequently,  is  subject  to  its  right  of  eminent  domain. 
The  theory  of  sovereignty,  which  invests  the  state  with  the 
right  and  the  power  to  permit  and  to  regulate  the  succession  to 
property  upon  its  owner's  decease,  rests  upon  the  fact  of  an 

1  Weaver's  Estate,  no  la.  328. 

2  Commonwealth  z's.  Coleman's  Administrator,  52  Pa.  468;  Bittinger's 
Estate,  129  Pa.  338. 

3  Matter  of  Swift,  137  N.  Y.  77. 


I 


182  THE  INHERITANCE  TAX  [352 

actual  dominion  over  that  property.  In  exercising  such  a  power 
of  taxation  as  is  here  in  question,  the  principle,  ohviously,  is 
that  all  property  in  the  state  is  tributary  for  such  a  purpose, 
and  the  sovereign  power  takes  a  portion,  or  percentage,  of  the 
property,  not  because  the  legatee  is  subject  to  its  laws  and  to 
the  tax,  but  because  the  state  has  a  superior  right,  or  owner- 
ship, by  force  of  which  it  can  intercept  the  property,  upon  its 
owner's  death,  in  its  passage  into  an  ownership  regulated  by 
the  enabling  legislation  of  the  state. 

And  in  a  case  in  the  Pennsylvania  Supreme  Court, ^  Mr. 
Chief  Justice  Paxson  said: 

It  has  not  been  made  to  appear  how  the  state  of  Pennsyl- 
vania can  impose  a  tax  upon  real  estate  situate  in  Maryland ; 
and  not  only  impose  a  tax  upon  it,  but  also  charge  it  with  a 
lien  for  such  unpaid  tax.  While  it  is  conceded  that  the  powers 
of  the  state  for  taxing  purposes  are  very  great,  they  are  neces- 
sarily limited  to  either  property  or  persons  within  her  borders. 
All  property  of  the  citizen  within  the  state  may  be  taxed,  and 
all  such  property  outside  the  state  as  is  drawn  to  or  follows  in 
law  the  person  or  domicile  of  the  owner,  such  as  bonds  and 
mortgages,  moneys  at  interest,  etc.,  no  matter  where  situate. 
But  real  estate  is  not  drawn  to  the  person  or  domicile  of  the 
owner,  for  taxation  or  any  other  purpose,  and  hence  cannot 
be  taxed  outside  of  the  jurisdiction  where  it  is  situate.  The 
taxation  of  property  involves  the  reciprocal  duty  of  protection 
on  the  part  of  the  state  levying  such  tax. 

But  the  tax  may  be  made  to  apply  to  personal  property, 
w^herever  situated,  if  the  decedent  was  domiciled  in  the  tax- 
ing state,  on  the  theory  that  the  situs  of  personal  property 
follows  the  person  of  the  owner ;  ^  and  on  the  other  hand, 
personal  property  within  the  state  may  be  taxed,  although 
the  decedent  resided  elsewhere.     Thus   in  an  early   Penn- 

1  Bittinger's  Estate,  129  Pa.  338. 

2  Matter  of  Swift,  137  N.  Y.  77;  Short's  Estate,  16  Pa.  63;  Hopkins' 
Appeal,  77  Conn.  644;  Frothingham  vs.  Shaw,  175  Mass.  59;  Hartman's 
Estate  (N.  J.),  62  Atl.  560. 


353]  LEGAL  THEORIES  lg3 

sylvania  case  ^  it  was  held  that  the  tax  apph'ed  to  securities 
in  Pennsylvania,  although  both  testator  and  legatee  were 
domiciled  in  France.  In  like  manner  the  North  Carolina 
tax  was  held  to  apply  to  property  in  that  state,  though  the 
decedent  was  domiciled  in  Canada.^  More  recently  it  has 
been  decided  that  the  Maryland  tax  applies  to  property  in 
Maryland  belonging  to  a  resident  of  California,  and  con- 
sisting of  national-bank  stock,  Baltimore  city  stock,  Mis- 
souri state  bonds,  and  cash ;  ^  and  that  the  New  York  law 
taxes  a  non-resident's  estate  in  New  York,  consisting  of 
a  mortgage  on  New  York  real  estate,  savings-bank  de- 
posits, and  corporate  stock  and  bonds.*  In  the  New  York 
case  it  did  not  appear  whether  the  stock  and  bonds  were 
issued  by  domestic  or  foreign  corporations.  The  Penn- 
sylvania tax  has  been  held  to  apply  to  the  interest  of  a 
non-resident  decedent  in  a  Pennsylvania  limited  partner- 
ship association.^  The  same  theories  of  dominion  and 
protection  which  were  applied  in  the  case  of  real  estate  have 
been  used  also  to  show  that  personal  property  may  be  taxed 
where  it  is  situated;  and  thus  the  fiction  mohilia  sequuntur 
personam  has  been  much  less  completely  recognized  in 
America  than  in  England,  where  the  decedent's  domicile 
is  the  sole  test  of  liability  to  the  legacy  duty.®  But  the 
English  statute  is  not  explicit  upon  this  point,  as  the 
American  statutes  are;  and  the  judicial  construction  of  the 
legacy-duty  act  is  just  the  reverse  of  the  rule  as  to  probate 
duty  ^  and  estate  duty. 

^  Commonwealth  vs.  Smith,  5  Pa.  142. 

2  Alvany  vs.  Powell,  2  Jones  Eq.  51. 

3  State  vs.  Dalrymple,  70  Md.  294. 

*  Matter  of  Romaine,  127  N.  Y.  80.  ■'''  Small's  Estate.  151  Pa.  i. 

8  Thomson  vs.  Advocate-General,  12  Clark  &  Finn,  i ;  Lenaghan.  The 
■  Legacy  Duty  Considered  with  Reference  to  the  Law  of  Doynicile. 
''  Attorney-General  vs.  Hope,  i  Cromp.,  Mees  &  Ros.  530. 


l84  T^HE  INHERITANCE  TAX  [3^4 

The  case  of  real  estate  directed  by  will  to  be  sold  gives 
rise  to  a  complication  peculiar  to  the  inheritance  tax.  It 
has  been  held  that  such  a  direction  works  a  conversion  of 
the  real  estate  into  personalty  at  the  testator's  death,  and 
that  the  tax  may  therefore  be  exacted  in  respect  of  foreign 
realty  by  the  state  of  the  testator's  domicile/  But  when 
the  executors  have  merely  the  power  to  sell,  without  a 
positive  direction  to  do  so,  the  property  is  still  regarded  as 
real  estate,  and  can  be  taxed  only  where  it  is  situated.^ 

There  is  a  Pennsylvania  decision  which  distinguishes  be- 
tween tangible  and  intangible  personal  property,  holding 
that  the  latter  has  no  situs  other  than  the  owner's  domicile, 
and  hence  that  a  non-resident  decedent's  United  States 
bonds  deposited  with  a  Pennsylvania  company  for  safe- 
keeping cannot  be  taxed  in  Pennsylvania.^  The  New  York 
courts  have  sometimes  suggested  a  similar  distinction,  at 
least  in  favor  of  the  stocks  and  bonds  of  foreign  corpora- 
tions ;  *  but  even  such  securities  were  held  to  be  taxable  in 
a  decision  ''  which  the  United  States  Supreme  Court  after- 
wards affirmed,  though  without  discussing  this  particular 
point."  Both  in  New  York  and  in  Massachusetts,  the  courts 
have  upheld  the  legislatures  in  their  evident  intention  to  tax 
the  shares  of  domestic  corporations,  without  regard  to  the 
domicile  of  the  decedent  or  executor  or  the  place  in  which 
the  certificates  of  stock  are  kept.     The  stock  is  held  to  be 

1  Miller  vs.  Commonwealth,  iii  Pa.  321;  Williamson's  Estate,  153 
Pa.  508;  contra.  Connell  vs.  Crosby,  210  111.  380.  390. 

-Drayton's  Appeal,  61  Pa.  172;  Matter  of  Swift,  137  N.  Y.  "jj, 
86.  Pecuniary  legacies  aggregating  more  than  the  value  of  the  per- 
sonal property  are  equivalent  to  a  direction  to  sell  real  estate. 
Vanuxem's  Estate,  212  Pa.  315. 

3  Orcutt's  Appeal,  97  Pa.  179. 

*  Matter  of  Enston,  113  N.  Y.  174,  181 ;  Matter  of  James,  144  N.  Y.  6. 

^  Matter  of  Merriam,  141  N.  Y.  479,  485. 

^  United  States  vs.  Perkins,  163  U.  S.  625. 


355]  LEGAL  THEORIES  1 85 

within  the  jurisdiction  of  the  state  because  it  is  regarded 
simply  as  an  interest  in  the  property  of  the  corporation  ;^  and 
the  Massachusetts  legislature  has  now  carried  out  the  same 
idea  to  its  logical  conclusion  by  dividing  the  tax  on  the  stock 
of  public-service  corporations  in  proportion  to  mileage,  at 
least  where  the  company  is  incorporated  also  in  another 
state." 

The  Federal  courts  have  had  occasion  both  to  construe 
the  intention  of  Congress  with  respect  to  property  of  for- 
eign decedents  and  to  define  the  power  of  a  state  over  prop- 
erty in  other  states.  The  act  of  1864  imposing  a  legacy 
tax  on  property  passing  "  either  by  will  or  by  the  intestate 
laws  of  any  State  or  Territory  "  was  held  not  to  apply  to 
American  securities  bequeathed  by  a  French  citizen  domi- 
ciled in  France  to  a  son  also  domiciled  there,  by  a  will  exe- 
cuted in  conformity  with  the  French  law,  although  a  pro- 
bate court  in  Massachusetts  appointed  an  executor  to  trans- 
fer the  securities  to  the  legatee.  It  was  considered  imma- 
terial whether  the  property  passed  by  will  or  by  intestate 
succession,^ 

This  decision  has  been  followed  by  the  Supreme  Court  in 
construing  the  similar  language  of  the  act  of  1898.  While 
conceding  it  to  be  within  the  power  of  Congress  to  impose 
an  inheritance  tax  upon  property  in  this  country,  the  court 
held  that  it  had  not  done  so  in  the  case  of  foreign  decedents 
leaving  the  property  to  their  children  also  domiciled  abroad, 
even  though  in  one  case  the  will  was  executed  in  this  coun- 
try during  a  temporary  sojourn,  and  probated  in  a  New 
York  court.*  The  succession  was  held  to  take  place  in  the 
country  of  domicile, 

1  Matter  of  Bronson,  150  N.  Y.  i,  9;  Callahan  vs.  Woodbridge,  171 
Mass.  595;  Greves  vs.  Shaw,  173  Mass.  205;  Moody  vs.  Shaw,  173 
Mass.  375. 

-  Acts  of  1907,  chap.  563,  §  2.     See  p.  133,  supra. 

3  United  States  vs.  Hunnewell,  13  Fed.  Rep.  617. 

*  Moore  vs.  Ruckgaber,  184  U.  S.  593. 


l86  I'HE  INHERITANCE  TAX  [356 

because  the  practice  of  all  civilized  nations  is  to  recognize  the 
law  of  the  domicil  as  governing  the  transmission  and  inheri- 
tance of  personal  property,  and  to  prevent  the  confusion  that 
would  follow  if  estates,  situated  possibly  in  half  a  dozen  coun- 
tries, were  administered  and  distributed  according  to  the  laws 
of  each  country  in  which  any  portion  of  such  estate  happened 
to  be  located.^ 

But  where  two  states  unmistakably  attempt  to  tax  the 
same  succession,  the  Supreme  Court,  though  recognizing 
the  inconsistency  and  resulting  hardship,  finds  no  constitu- 
tional prohibition  of  the  double  taxation.  A  debt  due  from 
a  New  York  firm  and  a  deposit  with  a  New  York  trust  com- 
pany were  held  to  be  subject  to  the  New  York  transfer  tax, 
although  the  whole  succession,  including  the  deposit,  had 
been  taxed  in  Illinois  where  the  decedent  lived : 

The  fact  that  two  States,  dealing  each  with  its  own  law  of 
succession,  both  of  which  the  plaintiff  in  error  has  to  invoke 
for  her  rights,  have  taxed  the  right  which  they  respectively 
confer,  gives  no  cause  for  complaint  on  constitutional  grounds. 
The  universal  succession  is  taxed  in  one  State,  the  singular 
succession  is  taxed  in  another.  The  plaintiff  has  to  make  out 
her  right  under  both  in  order  to  get  the  money.  The  same 
considerations  answer  the  argument  that  due  faith  and  credit 
are  not  given  to  the  judgment  in  Illinois. 

The  New  York  law  did  not  impair  the  obligation  of  the 
contract  of  deposit,  and  did  not  deprive  the  legatee  of  any 
of  the  privileges  and  immunities  of  a  citizen  nor  otherwise 
violate  the  Fourteenth  Amendment.  The  court  seems  to 
have  treated  the  deposit  as  a  debt  and  applied  the  same 
reasoning  to  both  obligations  : 

If  the  transfer  of  the  deposit  necessarily  depends  upon  and 
involves  the  law  of  New  York  for  its  exercise,  or,  in  other 

1  Eidman  vs.  Martinez,  184  U.  S.  5/8,  591. 


357]  LEGAL  THEORIES  187 

words,  if  the  transfer  is  subject  to  the  power  of  the  State  of 
New  York,  then  New  York  may  subject  the  transfer  to  a  tax. 
But  it  is  plain  that  the  transfer  does  depend  upon  the  law  of 
New  York,  not  because  of  any  theoretical  speculation  concern- 
ing the  whereabouts  of  the  debt,  but  because  of  the  practical 
fact  of  its  power  over  the  person  of  the  debtor.  .  .  . 

Power  over  the  person  of  the  debtor  confers  jurisdiction, 
we  repeat.  And  this  being  so,  we  perceive  no  better  reason 
for  denying  the  right  of  New  York  to  impose  a  succession  tax 
on  debts  owed  by  its  citizens  than  upon  tangible  chattels  found 
within  the  State  at  the  time  of  the  death.  The  maxim  mobilia 
sequnntur  personam  has  no  more  truth  in  the  one  case  than  in 
the  other.  ^ 

But  while  deposits  are  taxable  at  the  place  of  deposit, 
whether  regarded  as  debts  or  as  the  equivalent  of  actual 
money,^  and  quite  irrespective  of  the  place  where  the  certi- 
ficates of  deposit  may  be  kept,^  bonds  are  considered  by  the 
New  York  courts  at  least  as  following  the  owner's  domicile.* 
The  general  rule  seems  to  be  that  while  real  estate  is 
taxed  only  where  it  is  situated,  personal  property  may  be 
included  in  inheritance-tax  appraisals  either  where  it  is 
situated  or  at  the  domicile  of  the  decedent,  or  even  in 
both  places,  according  to  the  apparent  intention  of  the 
legislatures;  while  corporate  stocks  may  be  reached  also  at 
the  corporation's  home  office.  This  leaves  room  for  much 
confusion  and  double  taxation,  very  much  as  in  the  case  of 
property,  income,  and  corporation  taxes.  The  law  on  this 
point  is  therefore  in  an  unsatisfactory  state,  and  it  will 
probably  remain  so  until  changed  by  some  form  of  inter- 
state   action,    or    at    least    until    reciprocal    exemptions    or 

1  Blackstone  vs.  Miller.  188  U.  S.  189. 

2  MaUer  of  Houdayer,  150  N.  Y.  2,7- 

3  Matter  of  Hewitt,  181  N.  Y.  547;  Report  of  the  Comptroller  of  the 
State  of  New  York,  January,  1906,  p.  xlii. 

4  Matter  of  Bronson,  150  N.  Y.  i;  Matter  of  Whiting,  150  N.  Y. 
2~;  Matter  of  Morgan,  150  N.  Y.  35;  Report  of  the  Comptroller,  Jan- 
uary, 1906,  p.  xliii. 


l88  THE  INHERITANCE  TAX  [^^g 

deductions,  such  as  are  found  in  the  German  laws  and  in 
the  British  statute,  become  much  more  common  in  America. 
West  Virginia  has  such  a  provision ;  inheritance  taxes  due 
to  another  state  or  country  on  personal  property  therein  are 
deducted  from  the  tax  otherwise  payable  in  West  Virginia, 
and  the  personalty  of  non-resident  decedents  is  exempt  in 
so  far  as  the  state  or  country  of  residence  exempts  the  per- 
sonalty of  West  Virginians.^  Massachusetts  has  now 
adopted  a  similar  plan  to  prevent  double  taxation ;  ^  while 
Vermont  goes  even  further  and  unconditionally  deducts  any 
inheritance  tax  lawfully  paid  elsewhere.^  Connecticut, 
after  four  years'  trial  of  a  reciprocal  provision  with  refer- 
ence to  securities  and  deposits,*  has  adopted  a  retaliatory 
rather  than  reciprocal  arrangement  with  reference  to  the 
stock  and  bonds  of  domestic  corporations.  The  Connecti- 
cut tax  now  applies  to  the  following  property  of  non- 
resident decedents  passing  by  will  or  inheritance  under  the 
laws  of  other  states  or  countries : 

All  real  estate  and  tangible  personal  property,  including  moneys 
on  deposit,  within  this  state ;  all  intangible  personal  property, 
including  bonds,  securities,  shares  of  stock,  and  choses  in  ac- 
tion the  evidences  of  ownership  of  which  shall  be  actually 
within  this  state;  shares  of  the  capital  stock  or  registered 
bonds  of  all  corporations  organized  and  existing  under  the 
laws  of  this  state  the  certificates  of  which  stock  or  which  bonds 
shall  be  without  this  state,  where  the  laws  of  the  state  or 
country  in  which  such  decedent  resided  shall,  at  the  time  of 
his  decease,  impose  a  succession,  inheritance,  transfer,  or  simi- 
lar tax  upon  the  shares  of  the  capital  stock  or  registered  bonds 
of  all  corporations  organized  or  existing  under  the  laws  of 
such  state  or  country,  held  under  such  conditions  at  their  de- 
cease by  residents  of  this  state. ^ 

^  Acts  of  1904,  chap.  6,  §  6.  2  Acts  of  1907.  chap.  563,  §  3. 

3  Public  Acts  of  1904,  no.  30,  §  3. 

*  Public  Acts  of  1903,  chap.  63.      °  Public  Acts  of  1907,  chap.  179. 


CHAPTER  IX 
ECONOMIC  THEORY 

I.  Historical  Survey 

The  earliest  discussion  of  the  justice  of  the  inheritance 
tax  which  has  come  clown  to  us  is  that  of  Pliny  the  Younger 
in  his  Panegyric  on  the  Emperor  Trajan.  As  might  be 
expected  in  a  panegyric,  Pliny  expressed  unqualified  approval 
of  Trajan's  reforms,  especially  the  exemption  of  the  near- 
est relatives  in  all  cases.  Without  such  an  exemption,  he 
considered  the  viccsiiua  hcrcditatiiun  oppressive;  he  called 
it  "  tributiiui  tolcrabilc  ct  facile  heredibus  diiuitaxat  ex- 
traneis,  domesticis  grave."  ^  He  argued  that  so  heavy  a 
tax  as  the  vicesima  would  be  borne  with  great  reluctance 
by  those  who  were  entitled  to  their  inheritance  by  birth, 
kinship,  and  community  of  family  worship ;  who  had  always 
regarded  the  property  as  their  own  possession,  to  be  passed 
on  from  them  in  turn  to  their  heirs."  And  a  father  who 
had  just  lost  his  son  should  not  be  called  upon  in  his  be- 
reavement to  take  an  inventory  of  what  had  been  left  him;  '' 
to  tax  him  at  such  a  time  would  be  to  add  to  his  burden  of 

1  Panegyricus,  xxxvii. 

2  Ibid.,  xxxvii :  "  Videlicit,  quod  manifestum  erat,  quanto  cum  dolore 
laturi,  seu  potius  non  laluri  homines  essent,  destringi  aliquid  et  abradi 
bonis,  quae  sanguine,  gentilitate,  sacrorum  denique  societate,  meruissent, 
quseque  nunquam  ut  aliena  et  speranda,  sed  ut  sua  semperque  possessa, 
ac  dienceps  proximo  cuique  transmittenda  cepissent." 

3  Ibid.,  xxxviii :  "  Nemo  recentem  et  attonitam  orbitatem  ad  compu- 
tationem  vocet,  cogatque  patrem,  quid  reliquerit  filius,  scire." 

3591  189 


I90  THE  INHERITANCE  TAX  [360 

sorrow,'  to  treat  father  and  son  as  strangers.^  For  a 
father  to  become  the  sole  heir  of  his  own  son  was  a  great 
enough  sorrow,  without  making  the  state  an  unwelcome 
co-heir.^ 

Adam  Smith  gave  a  reason  of  a  less  sentimental  and  more 
economic  nature  for  exempting  direct  heirs  in  some  cases : 

The  death  of  a  father,  to  such  of  his  children  as  live  in  the 
same  house  with  him,  is  seldom  attended  with  any  increase, 
and  frequently  with  a  considerable  diminution  of  revenue ; 
by  the  loss  of  his  industry,  of  his  office,  or  of  some  life-rent 
estate,  of  which  he  may  have  been  in  possession.  That  tax 
would  be  cruel  and  oppressive  which  aggravated  their  loss  by 
taking  from  them  any  part  of  his  succession.  It  may,  how- 
ever, sometimes  be  otherwise  with  those  children  who,  in  the 
language  of  the  Roman  law,  are  said  to  be  emancipated;  in 
that  of  the  Scotch  law,  to  be  foris-familiated ;  that  is,  who 
have  received  their  portion,  have  got  families  of  their  own, 
and  are  supported  by  funds  separate  and  independent  of  those 
of  their  father.  Whatever  part  of  his  succession  might  come 
to  such  children,  would  be  a  real  addition  to  their  fortune, 
and  might,  therefore,  perhaps,  without  more  inconveniency 
than  what  attends  all  duties  of  this  kind,  be  liable  to  some  tax.* 

But  he  charged  inheritance  taxes  in  general,  in  common 
with  all  other  taxes  on  the  transfer  of  property,  with  violat- 
ing his  first  canon  of  taxation,  "  the  frequency  of  transfer- 
ence not  being  always  equal  in  property  of  equal  value." 
He  opposed  them  also  on  the  ground  that  they  "  tend  to 
diminish  the  funds  destined  for  the  maintenance  of  pro- 
ductive labour."  For  "  the  revenue  of  the  sovereign,"  he 
added,  "  seldom  maintains  any  but  unproductive  labourers." 

^  Panegyricus,  xxxviii :  "  Filio  amisso,  insuper  affici  alio  dolore." 
-  Ibid.,  xxxvii :  "  Qnod  liberos  ac  parentes  faceret  extraneos." 
3  Ibid.,  xxxviii :  "  Sic  quoqiie  abiinde  misera  res  est,  pater  filio  solus 
heres :  quid  si  coheredem  non  a  filio  accipiat  ?" 

*  Wealth  of  Nations,  bk.  v,  chap,  ii,  pt.  ii,  appendix  to  articles  i  and  2. 


^5i]  ECONOMIC  THEORY  IC^I 

Ricardo  elaborated  this  ol)jection,  but  avoidetl  the  danger- 
ous ground  of  distinguishing  between  productive  and  un- 
productive labor : 

It  should  be  the  policy  of  governments  ....  never  to  lay- 
such  taxes  as  vv^ill  inevitably  fall  on  capital ;  since  by  so  doing, 
they  impair  the  funds  for  the  maintenance  of  labor,  and  thereby 
diminish  the  future  production  of  the  country.  ...  If  a  leg- 
acy of  ii,ooo  be  subject  to  a  tax  of  £ioo,  the  legatee  considers 
his  legacy  as  only  £900  and  feels  no  particular  motive  to  save 
the  iioo  duty  from  his  expenditure,  and  thus  the  capital  of  the 
country  is  diminished ;  but  if  he  had  really  received  ii,ooo  and 
had  been  required  to  pay  iioo  as  a  tax  on  income,  on  wine, 
on  horses,  or  on  servants,  he  would  probably  have  diminished, 
or  rather  not  increased  his  expenditure  by  that  sum,  and  the 
capital  of  the  country  would  have  been  unimpaired.^ 

J.  B.  Say  also  believed  that  the  national  capital  would  be 
diminished  by  the  amount  of  the  inheritance  tax,"  but  on 
the  other  hand  he  argued  that  this  was  one  of  the  least  diffi- 
cult of  all  taxes  to  pay,  and  so  concluded  that  it  would  be 
injurious  only  when  carried  to  excess.^ 

McCulloch  was  little  influenced  by  the  tax-on-capital 
argument,  and  looked  at  the  effect  of  the  tax  from  another 
point  of  view.  He  criticised  Ricardo's  objection  as  fol- 
lows: 

It  might,  however,  be  exceedingly  inexpedient  to  impose  or 
increase  any  one  of  the  taxes  suggested  by  Mr.  Ricardo ;  and. 
provided  the  tax  on  successions  be  kept  within  due  limits,  we 
doubt  whether  the  considerations  he  has  stated  be  entitled  to 
much  weight.  The  slender  influence  of  the  tax  over  the  leg- 
atee is,  perhaps,  correctly  stated  by  Mr.  Ricardo;  but  then  it 

1  Principles  of  Political  Economy  and  Taxation,  chap.  viii. 

2  Traitc  d' economic  politique  (huitieme  edition),  livre  iii,  chap.  ix. 

3  Corns  complet  d'cconomic  Politique,  pt.  viii,  cliap.  iv. 


192  THE  INHERITANCE  TAX  [362 

is  to  be  borne  in  mind  that  the  individual  who  leaves  property 
is  aware  that  it  will  be  subjected  to  the  tax,  and  he,  conse- 
quently, has  an  additional  motive  to  save  and  amass  in  order 
that  his  heirs  may  not  be  prejudiced  by  its  payment.  And  this 
circumstance,  and  the  fact  of  the  tax  being  imposed  when  the 
contributors  are  receiving  money  or  other  property,  and,  con- 
sequently, when  it  is  most  convenient  for  them  to  pay  it,  ap- 
pears to  be  a  sufficient  answer  to  the  objections  against  it.^ 

Jeremy  Bentham,  writing  in  the  last  decade  of  the  eigh- 
teenth century,  propounded  the  following  conundrum : 

What  is  that  mode  of  supply,  of  zi'hicJi  the  tzventieth  part  is 
a  tax,  and  that  a  heavy  one,  zvhile  the  whole  zvonld  he  no  tax, 
and  would  not  he  felt  by  anyhodyf 

He  proposed  to  solve  the  riddle  by  abolishing  intestate 
inheritance  except  in  the  case  of  immediate  relatives,  and 
limiting  the  power  of  bequest  of  testators  having  no  direct 
heirs ;  leaving  fathers  free  to  dispose  of  their  property  as  they 
pleased.  He  furthermore  suggested  that  the  state  should 
have  an  equal  share  in  the  inheritance  of  such  relatives  as 
grandparents,  uncles  and  aunts,  and  perhaps  nephews  and 
nieces,  and  a  reversionary  interest  in  the  successions  of 
childless  heirs  without  prospect  of  children.  In  defending 
his  proposal  he  said : 

The  advantageous  properties  of  the  proposed  resource  may 
be  stated  under  the  following  heads,  viz.:  i.  Its  unburthen- 
someness.  2.  Its  tendency  to  cut  off  a  great  source  of  litiga- 
tion. 3.  Its  favorableness  to  marriage.  4.  Its  probable  pop- 
ularity on  that  score. 

But  Bentham  maintained  that  the  extension  of  escheat 
which  he  proposed  was  entirely  different  from  a  tax  on 

1  Taxation  and  the  Funding  System,  p.  290. 


363]  ECONOMIC  THEORY  I^-, 

successions.  Ricardo  afterward  objected  to  the  inheritance 
tax  on  the  ground  that  it  was  not  sufficiently  recognizable 
as  a  tax  to  be  an  incentive  to  economy;  but  Bentham  ob- 
jected to  it  because  it  was  too  plainly  a  tax : 

Suffer  a  mass  of  property  in  which  a  man  has  an  interest 
to  get  into  his  hajids,  his  expectation,  his  imagination,  his  atten- 
tion at  least,  fastens  upon  the  whole.  Take  from  him  after- 
ward a  part;  .  .  .  the  parting  with  it  cannot  but  excite  some- 
thing of  the  sensation  of  a  loss. 

But  in  the  extension  of  escheat, 

the  larger  the  share  of  the  public  the  better,  even  with  refer- 
ence to  his  feelings ;  for  the  larger  it  is,  the  more  plainly  it  will 
show  as  a  civil  regulation  in  matters  of  succession ;  the  smaller, 
the  more  palpably  it  will  have  the  air  of  a  fiscal  imposition — 
the  more  it  will  feel,  in  short,  like  a  tax.  .  .  .  Pass,  instead  of 
the  tax,  a  law  of  inheritance,  giving  the  public  fifty  per  cent 
upon  certain  successions,  the  burthen  may  be  next  to  nothing ; 
pass  a  law  of  inheritance,  giving  the  public  the  whole,  the 
burthen  vanishes  altogether.^ 

Something  akin  to  this  idea  of  Bentham's  is  occasionally 
met  with  among  more  recent  writers.  Thus  Stourm  says 
of  the  taxation  of  inheritances : 

The  former  owners  have  disappeared,  the  new  have  not  yet 
come  into  possession ;  meanwhile  the  fortune  seems  to  rest  in 
air,  at  the  mercy  of  the  budgetary  requirements. - 

And  a  brilliant  American  journalist  has  argued  thus: 

It  is  much  more  merciful  to  avaricious  human  nature  to  de- 
prive it  of  something  it  has  never  had  than  to  lop  off  any- 
thing— however  superfluous — which  has  been  actually  enjoyed. 

1  Supply  without  Burden;  or  Escheat  vice  Taxation,  1795. 

2  Systemes  generaux  d'impots,  chap,  xviii. 


194  THE  INHERITANCE  TAX  [354 

.  .  .  On  the  whole,  I  can  see  no  better  way  to  diminish  the 
natural  pangs  attendant  upon  paying  taxes  than  to  collect  as 
much  income  as  possible  in  the  fleeting  moments  when  the 
property  belongs  to  nobody  in  particular.^ 

John  Stuart  Mill  advocated  not  only  progressive  inherit- 
ance taxes,^  but  the  abolition  of  collateral  inheritance,  and 
a  limitation  of  the  amount  which  any  one  should  be  allowed 
to  take  either  by  inheritance  or  bequest/^  He  was  more 
radical  than  Bentham ;  he  adopted  the  substance  of  Ben- 
tham's  proposal  as  to  collateral  inheritance,  but  he  went 
further  and  wished  to  limit  inheritance  in  the  direct  line  also. 
After  laying  down  the  principles  that  the  law  ought  to  do 
for  the  children  or  dependents  of  an  intestate  whatever  it 
was  the  duty  of  the  parent  or  protector  to  have  done,  and 
that  it  is  not  ordinarily  the  dtity  of  any  one  to  make  pecun- 
iary provision  for  collateral  relatives,  he  continued  : 

I  see,  therefore,  no  reason  why  collateral  inheritance  should 
exist  at  all.  .  .  .  There  is  no  good  reason  why  the  accumula- 
tions of  some  childless  miser  should,  on  his  death  (as  every 
now  and  then  happens)  go  to  enrich  a  distant  relative  who 
never  saw  him,  who  perhaps  never* knew  himself  to  be  re- 
lated to  him  until  there  was  something  to  be  gained  by  it,  and 
who  had  no  moral  claim  upon  him  of  any  kind,  more  than  the 
most  entire  stranger. 

The  claims  of  children  are  of  a  different  nature :  they  are 
real,  and  indefeasible.     But  even  of  these,  I  venture  to  think 

that  the  measure  usually  taken  is  an  erroneous  one 

Whatever  fortune  a  parent  may  have  inherited,  or,  still  more, 
may  have  acquired,  I  cannot  admit  that  he  owes  to  his  chil- 
dren, merely  because  they  are  his  children,  to  leave  them  rich, 

1  Kate  Field's  Washington,  February  8,  1893. 

2  Principles  of  Political  Economy,  bk.  v,  chap,  ii,  §  3. 
*  Ibid.,  bk.  ii,  chap,  ii,  §§  3,  4;  bk.  v,  chap,  ix,  §  i. 


365]  ECONOMIC  THEORY  Iq- 

without  the  necessity  of  any  exertion.  .  .  .  Without  suppos- 
ing extreme  cases,  it  may  be  affirmed  that  in  a  majority  of 
instances  the  good,  not  only  of  society  but  of  the  individuals, 
would  be  better  consulted  by  bequeathing  to  them  a  moderate, 
rather  than  a  large  provision.  ...  I  should  prefer  to  restrict, 
not  what  any  one  might  bequeath,  but  what  any  one  should 
be  permitted  to  acquire,  by  bequest  or  inheritance. 

The  proposal  to  abolish  inheritance  between  distant  rela- 
tives has  been  approved  by  writers  of  the  most  diverse  views. 
In  this  the  socialists  are  in  accord  wnth  the  utilitarian  philo- 
sophy. The  demand  of  the  earlier  Saint  Simonians,  who 
wished  to  abolish  all  inheritance,  was  greatly  modified  by 
Enfantin,  wdio  was  willing  to  permit  inheritance  between 
near  relatives,  to  be  limited  by  heavy  inheritance  taxes. 
In  like  manner  Bhmtschli,  at  the  time  of  the  preparation  of 
the  civil  code  of  Zurich,  proposed  inheritance  taxes  of 
from  five  to  thirty  per  cent  for  relatives  descended  from 
common  great-grandparents,  and  the  abolition  of  inherit- 
ance and  bequest  between  all  other  persons.^  He  based  his 
proposals  on  what  he  called  a  right  of  inheritance  in  the 
state  and  commune.  This  conception  of  staatliches  Erb- 
rccht  has  been  adopted  by  many  of  the  later  German  writ- 
ers ;  and  either  from  this  point  of  view  or  owing  to  more 
purely  fiscal  considerations,  the  inheritance  tax  has  been 
approved  by  most  writers  on  finance  and  economics.^    Even 

1  "  Das  Erbrecht  und  die  Reform  des  Erbrechtes."  Gesammclte 
kleinc  Schriftcn,  233  ct  sea. 

'  Rail,  Finanzzvisscnschaft,  §§  237,  405 ;  Wagner,  Finanzwissenschaft, 
§§  482,  483;  Roscher,  Financivissenschaft,  §  76;  Schaffle,  Stcuerpolitik, 
p.  508 ;  von  Stein,  Finanzwissenschaft,  ii,  209 ;  Umpfenbach,  Finanz- 
wissenschaft, §§  203-206;  Cohn,  Science  of  Finance,  §  348;  von  Scheel, 
Erhsschaftsstciiern  und  Erbrechtsrcforni ;  Bacher,  Die  dcntschcn  Erb- 
schafts-  und  S chenkungsstcuren ;  Kriiger.  Die  Erbschaftssteiier:  Eschen- 
bach,  Erb)-echtsrefornt  und  Erbschaftssteucr;  Schall,  "  Verkehrs  und 
Erbschaftsstcuern."   in    Sclionberg's   Handbuch   der  politischcn   Oekon- 


196  THE  INHERITANCE  TAX  [355 

Bastable,  who  finds  a  number  of  theoretical  objections  to  it, 
concedes  "  that  it  has  come  to  be  ahnost  universally  re- 
garded as  an  essential  constituent  of  any  well-arranged 
scheme  of  finance."  ^  As  to  the  extent  to  which  it  should 
be  employed  there  are,  of  course,  wide  divergences  of 
opinion. 

In  America  progressive  inheritance  taxes  have  been  ad- 
vocated alike  in  the  platform  of  the  Knights  of  Labor,  in 
the  organ  of  the  Nationalists,  and  in  the  writings  and 
addresses  of  one  of  our  most  famous  millionaires.  Mr. 
Andrew  Carnegie  has  more  than  once  declared  himself  in 
favor  of  an  inheritance  tax  rising  as  high  as  fifty  per  cent 
in  the  case  of  the  largest  fortunes.  In  a  lecture  delivered 
in  New  York  City  in  February,  1892,^  he  even  went  so  far 
as  to  say : 

Every  dollar  of  taxes  required  might  be  obtained  in  this 
manner,  without  interfering  in  the  least  with  the  forces  which 
tend  to  the  development  of  the  country  through  the  produc- 
tion of  wealth. 

But  he  assumed  that  one-fifth  of  the  property  of  deceased 
persons  would  go  to  the  state ;  much  too  large  a  proportion 
unless  all  successions,  large  and  small,  were  to  be  heavily 
taxed.     In  1889  Mr.  Carnegie  wrote  as  follows:  ^ 

omie,  iii,  470;  Frantz,  Die  sociale  steuerrcform,  pp.  85-110;  von  Kauf- 
mann,  Die  Finansen  Frankrcichs,  p.  292 ;  De  Parieti,  Traite  dcs  impots, 
livre  vi,  chap,  iii;  Leroy-Beaulieu,  Science  des  finances,  chap,  xi;  Sidg- 
wick,  Principles  of  Political  Economy,  bk.  iii,  chap,  viii,  and  Elements 
of  Politics,  chap,  xi,  §  5;  Ely,  Taxation  in  American  States  and  Cities,. 
chap,  viii,  and  North  American  Review,  153:  54;  Seligman,  Essays  in 
Taxation,  chap.  v.  See  also  quotations  given  by  Schanz  in  Finam- 
Archiv,  vol.  18. 

1  Public  Finance,  bk.  iv,  chap,  viii,  §  7. 

2  Lectures  to  Young  Men,  p.  15. 

^  North  American  Review,  148:  659. 


^^y-^  ECONOMIC  THEORY  igy 

By  taxing  estates  heavily  at  death  the  state  marks  its  condem- 
nation of  the  selfish  millionaire's  unworthy  life.  It  is  desir- 
able that  nations  should  go  much  further  in  this  direction. 
Indeed,  it  is  difficult  to  set  bounds  to  the  share  of  a  rich  man's 
estate  which  should  go  at  his  death  to  the  public  through  the 
agency  of  the  state. 

And  in  his  New  York  lecture  he  declared : 

There  are  exceptions  to  all  rules,  but  not  more  exceptions,  we 
think,  to  this  rule  than  to  rules  generally,  that  the  "  almighty 
dollar  "  bequeathed  to  children  is  an  "  almighty  curse."  .  .  . 
No  man  has  a  right  to  handicap  his  son  with  such  a  burden  as 
great  wealth. 

The  same  ideas  were  developed  as  follows  in  his  work  on 
"  The  Gospel  of  Wealth  "  : 

The  growing  disposition  to  tax  more  and  more  heavily  large 
estates  left  at  death  is  a  cheering  indication  of  the  growth  of 
a  salutary  change  in  public  opinion.  ...  Of  all  forms  of  tax- 
ation this  seems  the  wisest.  Men  who  continue  hoarding 
great  sums  all  their  lives — the  proper  use  of  which  for  public 
ends  would  work  good  to  the  community  from  which  it  chiefly 
came — should  be  made  to  feel  that  the  community,  in  the  form 
of  the  State,  cannot  thus  be  deprived  of  its  proper  share.  .  .  . 
By  all  means  such  taxes  should  be  graduated,  beginning  at 
nothing  upon  moderate  sums  to  dependents,  and  increasing 
rapidly  as  the  amounts  swell,  until  of  the  millionaire's  hoard, 
as  of  Shylock's,  at  least 

The  other  half 
Comes  to  the  privy  coffer  of  the  State. 

This  policy  would  work  powerfully  to  induce  the  rich  man  to 
attend  to  the  administration  of  wealth  during  his  life,  which 
is  the  end  that  society  should  always  have  in  view,  as  being 
by  far  the  most  fruitful  for  the  people.  Nor  need  it  be  feared 
that  this  policy  would  sap  the  root  of  enterprise  and  render 


igg  THE  INHERITANCE  TAX  [368 

men  less  anxious  to  accumulate,  for,  to  the  class  whose  am- 
bition it  is  to  leave  great  fortunes  and  be  talked  about  after 
their  death,  it  will  attract  even  more  attention,  and,  indeed,  be 
a  somewhat  nobler  ambition,  to  have  enormous  sums  paid  over 
to  the  State  from  their  fortunes.^ 

That  the  parent  who  leaves  his  son  enormous  wealth  gener- 
ally deadens  the  talents  and  energies  of  the  son,  and  tempts 
him  to  lead  a  less  useful  and  less  worthy  life  than  he  other- 
wise would,  seems  to  me  capable  of  proof  which  cannot  be 
gainsaid.^ 

If  you  will  read  the  list  of  the  immortals  who  "  were  not 
born  to  die,"  you  will  find  that  most  of  them  have  been  born 
to  the  precious  heritage  of  poverty." 

Why  should  men  leave  great  fortunes  to  their  children?  If 
this  is  done  from  affection,  is  it  not  misguided  affection  ?  Ob- 
servation teaches  that,  generally  speaking,  it  is  not  well  for 
the  children  that  they  should  be  so  burdened.  Neither  is  it 
well  for  the  State.  Beyond  providing  for  the  wife  and  daugh- 
ters moderate  sources  of  income,  and  very  moderate  allow- 
ances indeed,  if  any,  for  the  sons,  men  may  well  hesitate;  for 
it  is  no  longer  questionable  that  great  sums  bequeathed  often 
work  more  for  the  injury  than  for  the  good  of  the  recipients. 
Wise  men  will  soon  conclude  that,  for  the  best  interests  of  the 
members  of  their  families,  and  of  the  State,  such  bequests  are 
an  improper  use  of  their  means. ^ 

Finally,  President  Roosevelt,  in  his  famous  "muck-rake" 
speech  on  the  laying  of  the  corner-stone  of  the  House  of 
Representatives  office  building,  April  14,   1906,  said: 

As  a  matter  of  personal  conviction,  and  without  pretending 
to  discuss  the  details  or  formulate  the  system,  I  feel  that  we 
shall  ultimately  have  to  consider  the  adoption  of  some  such 

1  The  Gospel  of  Wealth,  pp.  11.  12.  -  Ibid.,  p.  54. 

3  Ibid.,  p.  xii.  *  Ibid.,  p.  9. 


369]  ECONOMIC  THEORY  1^^^ 

scheme  as  that  of  a  progressive  tax  on  all  fortunes,  beyond  a 
certain  amount,  either  given  in  life  or  devised  or  bequeathed 
upon  death  to  any  individual — a  tax  so  framed  as  to  put  it 
out  of  the  power  of  the  owner  of  one  of  these  enormous  for- 
tunes to  hand  on  more  than  a  certain  amount  to  any  one  indi- 
vidual ;  the  tax,  of  course,  to  be  imposed  by  the  National  and 
not  by  the  state  government. 

And  he  has  elaborated  this  idea  in  his  Message  of  1906  and 
elsewhere. 

II.  The  Arguments  Classified 
If  we  examine  the  principal  arguments  which  have  been 
adduced  to  establish  the  justice  of  the  inheritance  tax,  we 
shall  find  that  they  are  no  less  than  eight  in  number,  and 
rest  upon  three  quite  different  conceptions  of  the  nature  of 
the  tax.  The  tax  is  regarded  (i)  as  a  limitation  of  inherit- 
ance, (2)  as  a  fee,  or  payment  for  special  benefits  received, 
and  (3)  as  a  tax  according  to  the  ability  of  the  tax-payer. 
Economic  theory  thus  agrees  with  legal  theory  in  distin- 
guishing between  taxation  and  the  regulation  of  inheritance; 
but  it  g'oes  farther  and  distinguishes  also  between  fees  and 
taxes,  and  between  the  different  theories  of  taxation. 

AS  A  LIMITATION   OF  INHERITANCE 

I.  The  Extensiofi-of-Escheat  Argument  is  that  repre- 
sented by  Bentham  and  by  all  who  would  abolish  or  limit 
collateral  inheritance.  Briefly  stated,  the  argument  is  that 
no  good  reason  exists  for  intestate  inheritance  between  dis- 
tant relatives,  for  in  modern  times  the  family  conscious- 
ness extends  only  to  the  nearest  degrees  of  relationship ; 
hence  the  property  of  those  dying  without  near  relatives 
should  escheat  to  the  state.  The  same  thing  may  be  accom- 
plished in  part  by  an  inheritance  tax;  and  even  applying  the 
principle  in  its  entirety,  since  it  is  difficult  and  perhaps  im- 
possible to  fix  a  precise  point  at  which  rights  of  inherit- 


200  THE  INHERITANCE  TAX  [370 

ance  should  cease  altogether,  it  is  perhaps  more  equitable  to 
take  them  away  from  some  relatives  only  in  part,  by  means 
of  an  inheritance  tax  graduated  according  to  the  degree  of 
relationship  and  rising  to  high  percentages  in  the  case  of 
distant  relatives.  This  argument  applies  primarily  to  cases 
of  intestacy;  yet  such  a  limitation  of  inheritance,  especially 
if  its  purpose  were  at  all  fiscal,  would  naturally  be  accom- 
panied by  a  corresponding  limitation  of  the  power  of  be- 
quest. 

2.  The  Diffusion- of -Wealth  Argument.  Inheritance  may 
be  limited  not  only  as  to  the  persons  who  may  inherit,  but 
also  as  to  the  amount  which  any  person  may  take.  This 
form  of  limitation  was  proposed  by  Mill,  and  has  frequently 
been  advocated  as  a  check  upon  the  perpetuation  of  danger- 
ously large  fortunes.  Some  years  ago,  for  example,  a  bill 
to  limit  inheritances  and  bequests  to  $500,000  in  the  case 
of  direct  heirs  and  $100,000  in  other  cases  was  introduced 
in  the  Illinois  legislature,  on  the  recommendation  of  a 
special  committee  of  the  Illinois  Bar  Association.^  The 
limitation  of  inheritance  in  some  such  way  as  this  has  been 
so  frequently  proposed  of  late  that  it  must  be  regarded  as 
at  least  a  possibility  of  the  future.  But  if  it  is  to  be  real- 
ized, it  would  better  be  by  means  of  a  progressive  inherit- 
ance tax ;  for  it  would  be  much  less  arbitrary  to  adopt  such 
a  graduated  scale  than  to  fix  a  point  up  to  which  inherit- 
ance and  bequest  might  operate  without  restriction,  and  at 
which  they  should  abruptly  cease.  Such  a  progressive  in- 
heritance tax  will  have  a  double  effect  upon  the  distribu- 
tion of  wealth:  it  will  affect  the  size  of  large  inheritances 
directly  by  diminishing  them  in  greater  proportion  than 
small  ones,  and  if  the  rate  be  made  to  depend  upon  the 

1  Ely,  Taxation  in  American  States  and  Cities,  pp.  515-523;  Jacobson, 
Higher  Ground,  pp.  194-202. 


371]  ECONOMIC  THEORY  20I 

value  of  the  separate  shares  it  will  also  tend  to  encourage 
the  division  of  large  estates  by  bequest  or  gift.  An  inherit- 
ance tax  may  affect  the  distribution  of  wealth  in  still  an- 
other way,  by  discriminating  rates  or  exemptions  in  favor 
of  bequests  to  servants  or  for  charitable  purposes. 

Of  all  the  arguments  for  the  inheritance  tax,  the  diffus- 
ion-of-wealth  argument  shows  the  nearest  approach  to  so- 
cialistic tendencies.  It  was  the  argument  of  the  National- 
ists, but  it  is  also  the  argument  of  Mr.  Carnegie  when  he 
advocates  a  progressive  inheritance  tax  rising  as  high  as 
fifty  per  cent  in  the  case  of  large  amounts.  Mr.  Edward 
Bellamy  carried  this  argument  so  far  that  he  was  not  will- 
ing to  permit  any  graduation  of  the  tax  except  according 
to  amount;  in  his  organ  The  Neiv  Nation  he  denounced 
graduation  according  to  relationship  as  absurd  and  vicious, 
but  expressed  the  belief  "  that  the  drastic  application  of  the 
inheritance  tax  is  eventually  to  be  one  of  the  most  effi- 
cacious instruments  in  preparing  the  way  for  economic 
equality."  ^  But  such  utterances  as  this  on  the  part  of  so- 
cialists must  not  be  allowed  to  create  the  impression  that 
the  limitation  of  inheritance  through  progressive  taxation 
is  essentially  a  socialistic  measure.  Inheritance  and  be- 
quest are  not  only  not  natural  rights,  they  are  not  even 
necessary  consequences  of  the  right  of  private  property; 
and  hence  the  proposal  to  restrict  inheritance  and  bequest, 
by  taxation  or  otherwise,  is  no  attack  upon  fundamental 
property  rights. 

AS  A  FEE 

3.  The  Partnership  Argument  is  simply  the  benefit  theory 
of  taxation  in  general  applied  to  the  inheritance  tax.  The 
state  is  represented  by  Eschenbach  "  as  a  silent  partner  in 

1  The  New  Nation,  March  5,  1892,  and  March  4,  1893. 

2  Erbrechtsreform  und  Erbschaftssteuer,  pp.  54,  55. 


202  THE  INHERITANCE  TAX  ^yj2 

the  business  of  each  citizen,  without  whose  aid  and  protec- 
tion it  would  be  impossible  to  transact  business  or  amass 
wealth;  when  the  partnership  is  dissolved  by  death,  the 
silent  partner  is  entitled  to  a  share  of  the  capital.  Stated  in 
this  form  the  argument  may  seem  rather  fanciful ;  but  in 
its  essence  it  is  simply  a  statement  of  the  intimate  relations 
which  exist  between  the  individual  and  the  state,  and  of  the 
manifold  useful  offices  performed  by  government  for  in- 
dividuals, which  may  be  conceived  to  give  the  state  a  better 
claim  to  the  property  of  a  decedent  than  can  be  advanced  by 
any  individual  who  was  of  no  assistance  to  the  owner  in 
accumulating-  it.  But  this  argument  is  in  reality  not  so 
much  a  justification  of  any  particular  kind  of  tax  as  of  taxa- 
tion in  general.  Mr.  Carnegie  has  recently  expressed  a 
somewhat  different  idea,  leading  to  the  same  practical  con- 
clusion, in  saying  that  the  conmiunity  creates  the  million- 
aire's wealth,  and  especially  certain  kinds  of  wealth.^ 

4.  The  Value-of -Service  Argument.  The  inheritance 
tax  is  sometimes  considered  as  a  payment,  not  for  the  bene- 
fits of  government  in  general,  but  for  particular  services 
connected  with  the  institutions  of  inheritance  and  bequest. 
It  is  argued  that  since  these  are  not  natural  rights,  but  privi- 
leges conferred  by  positive  law,  those  who  benefit  from  them 
owe  something  to  the  state  in  return  for  the  legal  regula- 
tions which  give  them  the  right  to  the  property  of  another 
after  his  death,  for  the  legal  proceedings  necessary  to  put 
them  in  possession,  and  for  the  protection  of  the  property 
while  the  transfer  is  being  effected,  when  it  would  other- 
wise be  especially  liable  to  unlaAvful  depredations  or  to 
unauthorized  appropriation.  Leroy-Beaulieu  compares  the 
tax  to  an  insurance  premium ;  -  but  the  analogy  is  imper- 

'^  North  American  Rcvieiv,  183:  1098  (Dec.  7,  1906). 
2  Science  dcs  finances,  chap.  xi. 


373]  ECONOMIC  THEORY  203 

feet,  for  it  is  not  the  function  of  government  to  make  good 
losses,  but  to  prevent  them. 

This  theory  will  justify  graduation  according  to  relation- 
ship, for  there  is  a  greater  degree  of  probability  that  prop- 
erty would  be  transmitted  in  the  direct  line,  even  in  the 
absence  of  laws  of  inheritance,  than  to  remote  relatives  or 
strangers,  who  would  seldom  be  in  possession  of  the  prop- 
erty at  the  owner's  death,  and  would  not  very  often  receive 
it  by  death-bed  gift;  the  state  may  therefore  be  said  to 
render  a  greater  service  to  the  heirs  when  property  goes 
to  distant  relatives  than  when  it  is  simply  handed  down 
from  father  to  son.  In  the  case  of  a  very  remote  relative 
the  value  of  the  state's  service  may  be  nearly  the  whole 
value  of  the  inheritance,  because  there  is  very  little  likeli- 
hood of  property  passing  to  remote  relatives  except  by 
operation  of  law. 

5.  The  Cost-of-Scrvicc  Argument  considers  the  expense 
of  the  governmental  action  rather  than  its  value  to  the  heir. 
It  would  be  difficult  to  determine  the  amount  which  ought 
to  be  paid  in  accordance  with  the  value-of-service  theory, 
but  it  certainly  seems  no  more  than  just  that  the  cost  of 
probate  courts  should  be  defrayed,  in  large  part  at  least, 
by  those  who  receive  the  most  direct  and  palpable  benefits 
from  them.  This  argument  has  been  neglected  by  theoreti- 
cal writers,  but  its  influence  may  be  plainly  seen  in  the  legis- 
lation of  several  American  commonwealths  and  Canadian 
provinces  where  moderate  inheritance  taxes  or  probate  fees 
have  been  imposed  for  the  express  purpose  of  defraying  the 
cost  of  probate  courts.  This  argument  would  logically  re- 
sult in  a  light  tax,  not  proportional  to  the  estate,  but  re- 
gressive, or  even  uniform  for  all  estates;  or  still  more  logi- 
cally, in  a  system  of  fees  varying  with  the  extent  of  the 
proceedings  necessary. 


204  '^^^  INHERITANCE  TAX  [374 

AS   A   TAX 

6.  The  Back-Taxes  Argument.  It  is  a  well-known  fact 
that  vast  amounts  of  personal  property  escape  taxation  alto- 
gether during  the  lives  of  the  owners.  Inheritance  taxes 
have  therefore  been  proposed  as  a  means  of  collecting  taxes 
which  have  been  evaded  by  property-owners  during  their 
lives.  It  is  frequently  argued  that  the  property  which  so 
generally  escapes  taxation  year  by  year  should  at  least  be 
made  to  contribute  something  at  the  death  of  the  owners, 
when  it  can  no  longer  be  concealed.  The  inheritance  tax 
is  regarded  as  an  improved  method  of  reaching  personalty; 
and  this  explains  why  it  is  so  often  applied  in  this  country 
to  personal  property  alone,  especially  where  direct  heirs  are 
concerned.  It  was  this  consideration,  for  example,  which 
led  the  New  York  legislature  to  impose  the  direct-inherit- 
ance tax  on  personalty  alone.  The  same  argument  was 
afterward  advanced  by  Comptroller  Roberts  as  a  reason 
for  making  the  inheritance  tax  progressive,  for  it  is  thought 
to  be  the  wealthier  citizens  whose  wealth  the  property  tax 
chiefly  fails  to  reach;  and  the  failure  of  the  state  taxes  on 
personal  property  was  even  urged  in  Congress  in  1898  as  a 
reason  for  a  National  inheritance  tax.  In  short,  so  far  as 
the  motives  of  legislation  can  be  ascertained,  this  argument 
of  evasion  seems  to  have  been  more  influential  than  any 
other  in  the  remarkable  extension  of  the  inheritance  tax  in 
America  during  recent  years.  Yet  from  the  standpoint  of 
strict  justice  between  individuals  the  argument  is  vulner- 
able, for  the  inheritance  tax  bears  no  necessary  relation  to 
the  amount  of  taxes  which  have  been  evaded  in  individual 
cases,  unless  where  a  tax  is  so  universally  and  uniformly 
evaded  as  to  be  practically  a  dead  letter.  In  Prussia  and 
some  of  the  Swiss  cantons  back  taxes  are  collected  after 
death,  where  evasion  can  be  proved ;  but  this  is  in  addition 
to  the  inheritance  tax,  and  rather  different  in  principle. 


375]  ECONOMIC  THEORY  205 

7.  The  Luinp-Suni  Argument.  The  inheritance  tax 
may  better  be  regarded  as  in  lieu  not  of  taxes  which 
have  been  evaded,  but  of  taxes  which  have  not  been 
imposed;  that  is,  as  a  property  tax,  or,  as  Bastable  sug- 
gests, a  capitalized  income  tax,  paid  once  in  a  generation  in- 
stead of  once  a  year.  It  is  paid  after  the  death  of  the  tax- 
payer, and  hence  at  the  time  most  convenient  for  him;  or 
it  may  be  considered  as  being  paid  by  the  heir  in  advance. 
Where  there  is  no  tax  on  personal  property,  for  example, 
the  inheritance  tax  may  be  regarded  as  taking  its  place ;  and 
even  where  all  property  is  taxed,  the  tax  rate  may  be  ex- 
pected to  be  reduced  wdien  an  inheritance  tax  is  imposed, 
and  hence  the  latter  is  not  an  additional  burden,  but  only 
a  different  method  of  raising  part  of  the  necessary  revenue. 
A  consideration  which  has  been  strongly  urged  in  favor  of 
the  inheritance  tax  in  Germany  is  that,  levied  in  conjunc- 
tion with  an  income  tax,  its  effect  is  to  increase  the  burden 
on  income  from  property  as  compared  with  that  from  per- 
sonal exertion — the  same  argument  that  led  in  Prussia  to 
the  introduction  of  a  property  tax  supplementary  to  the  in- 
come tax.  The  British  estate  duty,  in  particular,  as  dis- 
tinguished from  the  legacy  and  succession  duties  paid  on  the 
separate  shares,  has  been  said  to  take  the  place  of  the  yearly 
taxes  on  the  capital  value  of  property  which  in  other  coun- 
tries are  levied  concurrently  with  income  taxes. ^  The  argu- 
ment applies  with  special  force  to  the  estate  duty  because 
it  is  not  graduated  according  to  relationship ;  the  weak  point 
of  the  argument  as  applied  to  inheritance  taxes  in  general 
is  that  it  fails  to  account  for  such  graduation. 

8.  The  Accidental-Income  Argument.  From  the  stand- 
point of  the  heir,  an  inheritance  is  a  sudden  acquisition  of 
property  without  effort  on  his  part;  a  fortuitous  and  per- 

1  Journal  of  the  Society  of  Comparative  Legislation,  1905,  PP-  490-493- 


2o6  THE  INHERITANCE  TAX  [376 

haps  unexpected  accretion  of  wealth,  which  manifestly  in- 
creases his  ability  to  pay  taxes.  Theoretically,  his  annual 
property  tax  will  be  increased  by  the  possession  of  this 
added  wealth,  but  in  the  case  of  personal  property  this  can- 
not be  depended  upon.  It  is  conceivable  that  where  there 
is  an  income  tax,  inheritances  might  be  taxed  as  one  form 
of  income;  but  on  account  of  their  accidental  or  gratuitous 
nature  it  seems  better  to  subject  them  to  a  separate  tax  at 
a  higher  rate  than  the  income  tax,  or  in  addition  to  the 
property  tax. 

Schanz  presents  this  argument  as  follows : 

Inheritances  and  legacies  mean  for  the  recipient  enrichment, 
and  consequently  an  increase  of  the  tax-paying  ability.  This 
applies  to  the  inheritance  tax  in  common  with  the  production 
tax  and  income  tax,  but  the  latter  have  to  do  with  that  ability 
which  has  arisen  from  the  work  and  economic  activity  of  the 
tax-payers,  while  inheritances  have  in  great  measure  the  char- 
acter of  unearned  wealth,  and  are  therefore  to  be  classed  with 
lottery  winnings,  speculative  gains,  and  similar  acquisitions. 
If  we  tax  that  for  which  a  man  has  labored,  then  it  is  still 
more  reasonable  that  we  must  not  leave  untaxed  the  income 
acquired  by  chance.^ 

It  is  not  true  in  every  case,  however,  that  the  inheritance 
of  property  involves  a  real  increase  of  tax-paying  ability. 
As  Adam  Smith  clearly  pointed  out,  the  death  of  the  head 
of  a  family  may  be  a  positive  economic  loss  to  the  wife  and 
children  who  lived  in  the  same  house  with  him,  enjoyed  the 
use  of  his  property  during  his  life,  and  were  dependent  upon 
his  personal  exertions  for  their  support.  But  if  his  income 
was  from  property  rather  than  from  trade  or  labor,  his 
death  will  make  little  difference  in  the  economic  condition 
of  the  family ;  and  in  any  case  where  property  is  inherited 

'  Finanz-Archiv,  18:  672. 


277]  ECONOMIC  THEORY  20/ 

by  collateral  relatives,  or  even  by  self-supporting  adult  chil- 
dren, there  is  a  distinct  increase  of  tax-paying  ability.  The 
more  distant  the  relationship,  the  more  truly  may  the  ac- 
quisition be  said  to  be  accidental,  and  the  less  (other  things 
being  equal)  will  be  the  sacrifice  involved  in  paying  a  given 
tax.  This  consideration  logically  results  in  graduation  ac- 
cording to  relationship,  the  widow  and  minor  children  be- 
ing either  wholly  exempt  or  taxed  only  on  the  excess  above 
an  amount  which  will  yield  an  income  sufiicient  for  sub- 
sistence. 

The  Co-heirship  of  the  State.  It  remains  to  consider 
what  is  known  as  the  theory  of  state  co-heirship.  Blunt- 
schli,  in  proposing  heavy  inheritance  taxes  graduated  accord- 
ing to  relationship,  and  the  abolition  of  rights  of  inherit- 
ance and  bequest  between  all  but  near  relatives,  conceived 
the  state  and  the  local  political  units  as  co-heirs  with  in- 
dividuals. The  expression  has  been  adopted  by  many  Ger- 
man writers,  and  by  Professor  Ely  in  America.^  Some  of 
the  Germans  are  so  fond  of  the  expression  that  they  apply 
the  name  staatliches  Miterhrccht  to  any  theory  of  the  lim- 
itation of  inheritance;  thus  Kriiger  cites  Bentham  as  the 
chief  exponent  of  the  theory  of  state  co-heirship,  although 
Bentham  himself  made  no  use  of  that  expression.  His  plan 
was  to  abolish  intestate  inheritance  except  between  immedi- 
ate relatives,  to  restrict  the  power  of  bequest  of  testators 
having  no  direct  heirs,  and  to  give  the  state  a  part  of  the 
property  of  decedents  in  certain  cases.  He  called  the  sys- 
tem which  he  proposed  an  extension  of  escheat,  and  based  it 
not  upon  any  right  of  inheritance  in  the  state,  but  upon  the 
absence  of  any  reason  for  the  operation  of  intestate  inherit- 
ance between  individuals  not  closely  related.  It  is  there- 
fore  a   mistake  to   call    Bentham   a   representative   of  the 

^  North  American  Rcz'ietv,  153:  6r. 


2o8  THE  INHERITANCE  TAX  [^^g 

theory  of  state  co-heirship.  But  later  writers  have  com- 
bined with  his  argument  the  thought  which  hes  at  the  basis 
of  the  partnership  argument,  and  have  urged  that  the  state 
should  inherit  property  from  individuals  because  of  what  it 
does  for  them  during  their  lives.  The  state  is  sometimes 
represented  as  a  larger  family;  according  to  Umpfenbach  ^ 
the  bond  of  kinship  between  distant  relatives  loses  itself 
in  the  whole  nation,  which  therefore  inherits  the  property  of 
individuals  as  the  family  inherits  the  property  of  its  mem- 
bers. Such  expressions  as  these,  however,  must  be  re- 
garded as  metaphorical  rather  than  scientific.  The  state 
may  acquire  property  by  escheat,  but  not  by  inheritance. 
Inheritance  implies  kinship,  and  the  modern  state  is  not  a 
genetic  association.  The  representation  of  the  state  as  co- 
heir is  either  a  mere  figure  of  speech  (and  as  such  it  is  as 
old  as  Pliny)  or  else  it  results  from  a  confusion  of  inherit- 
ance and  escheat.  Inheritance  is  not  a  matter  of  public 
law ;  it  is  for  private  law  to  prescribe  how  far  inheritance 
shall  be  permitted  between  individuals,  and  for  public  law 
to  ordain  that  where  inheritance  ends  escheat  shall  begin. 

It  is  not  altogether  easy  to  decide  which  of  the  argu- 
ments for  the  inheritance  tax  is  most  conclusive.  Some 
weight  is  to  be  attached  to  each  of  them,  and  certainly  no 
one  of  them  alone  will  be  able  to  explain  all  the  provisions 
of  actual  legislation.  The  arguments  are  not  mutually  ex- 
clusive, but  are  to  some  extent  cumulative.  The  inheritance 
tax  in  general  may  be  regarded  as  a  limitation  of  inherit- 
ance, especially  between  collateral  relatives ;  but  it  may  also 
be  sufficiently  well  justified  from  the  standpoint  of  pure 
finance.  It  accords  as  well  as  any  other  one  tax  both  with 
the  principle  of  ability  or  minimum  sacrifice  and  with  that 
of  benefit,  and  it  serves  as  a  useful  adjunct  to  other  taxes  in 
bringing  about  justice  in  the  fiscal  system  as  a  whole. 
1  Finanzzvisscnschaft,  §  203. 


379]  ECONOMIC  THEORY  209 

III.  Objpxtions  Considered 
I.  Inheritance  taxes  have  been  objected  to  chiefly  on  the 
ground  that  they  are  taxes  on  capital,  and  hence  tend  to 
diminish  the  national  wealth.  This  objection  has  been 
raised  by  Adam  Smith,  Ricardo,  and  many  later  writers. 
Even  so  recent  an  author  as  Bastable  has  objected  to  the 
inheritance  tax  as  a  tax  on  property  rather  than  on  in- 
come, and  as  tending  therefore  to  retard  the  growth  of 
wealth.  But  the  objection  was  really  demolished  by  Mill, 
who  showed  that  the  diminution,  if  it  occurred,  would  be 
not  so  much  the  result  of  the  mode  of  taxation  as  of  its  ex- 
cessive amount.     Again,  he  said  : 

The  argument  cannot  apply  to  any  country  which  has  a  na- 
tional debt,  and  devotes  any  portion  of  revenue  to  paying  it 
off;  since  the  produce  of  the  tax,  thus  applied,  still  remains 
capital,  and  is  merely  transferred  from  the  tax-payer  to  the 
fundholder.  But  the  objection  is  never  applicable  in  a  coun- 
try which  increases  rapidly  in  wealth.  The  amount  which 
would  be  derived,  even  from  a  very  high  legacy  duty,  in  each 
year,  is  but  a  small  fraction  of  the  annual  increase  of  capital 
in  such  a  country;  and  its  abstraction  would  but  make  room 
for  saving  to  an  equivalent  amount :  while  the  effect  of  not 
taking  it,  is  to  prevent  that  amount  of  saving,  or  cause  the 
savings,  when  made,  to  be  sent  abroad  for  investment. 

Leroy-Beaulieu  has  also  pointed  out  that  wdiether  a  tax 
is  paid  out  of  capital  or  income  depends  not  upon  the  form 
of  the  tax,  but  upon  its  amount  and  the  time  allowed  for 
payment.  And  even  if  capital  should  be  the  source  as  well 
as  the  subject  of  the  tax  in  a  given  case,  it  does  not  neces- 
sarily follow  that  the  national  capital  will  be  diminished ; 
for,  aside  from  the  transference  of  capital  suggested  by  Mill, 
the  inheritance  tax  is  favorable  to  saving  on  the  part  of 
those  whose  annual  taxes  are  lighter  than  they  would  be 


2IO  THE  INHERITANCE  TAX  [380 

without  ft.  Indeed,  one  of  the  arguments  in  favor  of  the 
inheritance  tax  is  that  by  diminishing  large  fortunes  it  will 
tend  to  bring  about  a  better  distribution  of  wealth.  We  no 
longer  regard  capital  as  so  sacred  and  inviolable  a  fund  as 
the  classical  economists  conceived  it  to  be.  It  is  conceiv- 
able that  the  amount  of  wealth  devoted  to  production  might 
even  become  too  large  in  proportion  to  that  remaining  avail- 
able for  consumption,  in  which  case  the  dissipation  of  some 
part  of  capital  would  be  necessary  to  restore  the  equilibrium. 
However  that  may  be,  there  is  certainly  danger  in  the  con- 
centration of  too  much  wealth  under  the  control  of  a  few 
individuals ;  and  hence  the  argument  that  a  tax  may  be  paid 
out  of  capital  in  some  cases  no  longer  appeals  to  us  as  a 
serious  objection. 

2.  Adam  Smith  considered  the  inheritance  tax  unequal, 
on  account  of  the  varying  frequency  of  transfers  result- 
ing from  death;  and  the  same  objection  has  often  been 
brought  forward  since  his  time.  It  has  even  been  suggested 
that  this  cause  of  inequality  may  operate  in  the  long  run 
between  families,  because  of  hereditary  differences  in  lon- 
gevity. But  this  objection  can  be  sustained  only  by  regard- 
ing the  inheritance  tax  as  a  property  tax  paid  once  in  a 
generation ;  it  looks  only  at  the  property,  and  disregards  the 
ability  of  the  tax-payer.  If  the  tax  be  regarded  as  a  limi- 
tation of  inheritance,  or  as  a  probate  fee,  or  as  a  tax  based 
upon  the  increase  of  tax-paying  ability  resulting  from  in- 
heritance, there  is  no  inequality  in  exacting  it  as  often  as 
the  devolution  occurs.  The  tax  may  be  paid  at  unequal  in- 
tervals in  respect  of  the  same  property,  but  it  is  paid  each 
time  by  a  different  person,  as  a  result  of  a  new  change  of 
ownership,  and  hence  from  the  standpoint  of  individual 
ability  or  sacrifice  it  cannot  be  said  to  be  unequal.  Ques- 
tions of  justice  in  taxation  must  always  have  regard  for  the 
individual  tax-payer  rather  than  for  the  property,  which 


381]  ECONOMIC  THEORY  211 

neither  appreciates  justice  nor  resents  oppression.  Where  the 
property  remains  in  the  same  fann'ly  and  may  be  regarded 
as  belonging  to  the  memljers  in  common,  it  is  true  that 
heavy  taxes  becoming  payable  in  quick  succession  might 
prove  oppressive  by  making  necessary  the  sale  of  family 
real  estate;  yet  this  is  perhaps  an  argument  rather  for  gen- 
erous exemptions  or  low  rates  in  favor  of  direct  heirs,  or 
for  allowing  the  tax  to  be  paid  in  instalments,  than  for  any 
discrimination  according  to  the  intervals  at  which  the  de- 
volutions occur.  In  the  case  of  collateral  inheritance  it 
obviously  makes  little  difference  to  the  heir  whether  the 
property  has  changed  hands  twice  within  a  few  months  or 
remained  in  the  same  hands  for  half  a  century.  How- 
ever, it  is  sometimes  attempted  to  avoid  the  supposed  in- 
equality, at  least  in  the  case  of  direct  successions,  by  exempt- 
ing or  partly  exempting  the  second  devolution  of  property 
within  a  given  period.  As  another  way  out  of  the  diffi- 
culty, Leroy-Beaulieu  commended  the  former  English  prac- 
tice of  reckoning  the  succession  duty  according  to  the  heir's 
expectation  of  life ;  but  this  led  to  the  undesirable  result  of 
taxing  minors  more  heavily  than  adults.  If  any  discrimi- 
nation is  to  be  made,  it  is  much  better  to  consider  the  inter- 
val since  the  last  devolution  rather  than  the  probable  length 
of  time  before  the  next  one,  which  is  never  certain.  But 
when  direct  inheritances  are  exempt  to  an  amount  sufficient 
to  yield  a  subsistence,  no  such  discrimination  is  necessary. 

3.  It  has  been  said  that  to  levy  a  property  tax  and  an  in- 
heritance tax  on  the  same  property  in  the  same  year  con- 
stitutes double  taxation.  This  objection  also  results  from 
regarding  the  property  rather  than  the  tax-payer,  and  even 
so  is  little  more  than  a  play  upon  words.  Double  taxation, 
in  this  opprobrious  sense,  implies  inequality  of  taxation. 
The  taxing  of  all  property  and  all  income  from  property,  or 
of  all  property  and  certain  inheritances  of  property,  is  not, 


212  THE  INHERITANCE  TAX  [38:? 

properly  speaking,  double  taxation ;  that  is,  it  is  not  unequal 
taxation,  unless  one  or  the  other  of  the  two  taxes  is  un- 
just of  itself. 

4.  When  the  provisions  of  existing  laws  are  considered, 
the  cry  that  the  inheritance  tax  is  "  a  tax  upon  widows  and 
orphans  "  will  be  seen  to  be  utterly  absurd.  In  America,  at 
least,  wherever  the  tax  applies  to  widows  and  orphans  at  all 
the  possibility  of  oppression  is  precluded  by  low  rates  and 
generous  exemptions.  Even  in  the  absence  of  exemptions, 
as  in  France,  the  objection  is  less  real  than  it  at  first  appears, 
and  applies  in  a  comparatively  small  number  of  cases;  for 
in  the  natural  order  of  things  death  comes  at  an  advanced 
age,  after  the  children  are  grown  up  and  able  to  take  care 
of  themselves.^ 

5.  The  objections  that  the  tax  will  discourage  industry 
and  thrift,  and  that  it  will  drive  away  capital,  really  apply 
to  the  inheritance  tax  less  than  to  almost  any  other  form  of 
taxation.  Death  is  usually  looked  upon  as  a  remote  event, 
and  occupies  no  very  prominent  place  in  the  minds  of  men ; 
and  if  a  man  has  the  inclination  to  save  property  to  leave 
to  his  heirs,  his  efforts  will  not  be  diminished,  but  perhaps 
rather  increased,  by  the  thought  that  one  or  two  per  cent 
of  his  savings  must  go  to  the  state.  The  inheritance  tax 
is  less  a  discouragement  to  industry  than  an  income  tax; 
it  is  less  a  discouragement  to  thrift  than  a  property  tax; 
and  no  tax  which  can  be  levied  on  movable  wealth  will  have 
less  effect  in  driving  away  capital.  The  deterrent  effect  of 
a  tax  to  be  paid  after  death  is  not  to  be  compared  with  that 
of  a  tax  which  must  be  paid  every  year. 

6.  It  is  sometimes  objected  that  the  tax  will  be  evaded  by 
gifts  inter  vivos.  On  the  other  hand,  one  argument  in  its 
favor  is  that  by  encouraging  the  distribution  of  large  for- 

1  Cf.  Leroy-Beaulieu,  Science  dcs  Fmanccs,  4th  ed.,  p.  514. 


383]  ECONOMIC  THEORY  213 

tunes  during  the  lives  of  the  owners  it  will  tend  to  bring 
about  a  better  distribution  of  wealth.  As  a  matter  of  fact, 
men  do  not  give  away  large  amounts  of  property  during 
life  for  the  purpose  of  escaping  taxation.  Most  men  would 
rather  let  the  state  take  a  small  portion  of  their  property 
after  they  are  dead  than  give  away  the  whole  while  they  are 
alive,  even  to  their  nearest  relatives.  So  far  as  gifts  caiisd 
mortis  are  concerned,  inheritance  taxes  almost  invariably 
apply  to  them  equally  with  bequests. 

7.  The  inheritance  tax  has  been  denounced  as  confisca- 
tion, extortion,  and  a  dangerous  step  toward  communism. 
This  is  declamation  rather  than  argument;  and  it  is  a  suffi- 
cient answer  to  point  to  the  numerous  theories  by  which 
the  tax  may  be  explained  from  the  standpoint  of  pure 
finance.  It  is  no  more  confiscation,  or  extortion,  than  any 
other  tax;  if  it  appears  so  it  is  because  it  is  less  familiar, 
just  as  the  introduction  of  a  property  tax  where  it  is  a 
novelty  has  sometimes  been  considered  unduly  oppressive, 
or  a  step  toward  confiscation.^  New  taxes  are  not  apt  to 
be  popular  with  those  who  expect  to  have  to  pay  them,  how- 
ever great  an  improvement  they  may  be  upon  the  old. 

IV.  Practical  Advantages 

Whatever  may  be  thought  as  to  the  equality  of  the  in- 
heritance tax,  it  will  scarcely  be  doubted  that  it  complies 
with  Adam  Smith's  other  three  canons.  It  is  certain,  the 
cost  of  collection  is  not  necessarily  high,  and  as  to  the  time 
of  payment  it  is  the  most  convenient  of  all  direct  taxes. 
Mr.  Bolton  Hall,  when  secretary  of  the  New  York  Tax 
Reform   League,    denied    its    convenience,    on   the   ground 

1  See  "  Plan  of  Tax  Reform  in  Prussia,"  Journal  of  Political  Econ- 
omy, i.  324;  translated  from  the  Bulletin  de  Statistique  et  de  Legisla- 
tion Comparee,  December,  1892.  Witness  also  the  temporary  unpopu- 
larity of  the  Hollander  Act  in  Porto  Rico. 


214  ^'^^  INHERITANCE  TAX  [384 

that  almost  all  estates  are  pressed  for  ready  money.  ^  It 
must  be  admitted  that  the  settlement  of  estates  is  often  at- 
tended with  considerable  expense;  but  income-yielding  prop- 
erty does  not  cease  to  be  productive  when  the  owner  dies, 
and  moreover,  it  is  not  essential  that  the  inheritance  tax 
should  always  be  paid  out  of  the  current  interest.  The 
contemplation  of  law  is  that  legatees  should  pay  the  tax 
on  their  specific  legacies,  and  that  pecuniary  legacies  should 
be  diminished  by  the  amount  of  the  tax.  In  some  cases  it 
may  be  necessary  to  sell  part  of  the  estate  in  order  to  pay  a 
heavy  inheritance  tax,  but  this  is  most  likely  to  happen 
when  collateral  heirs  inherit,  and  there  is  certainly  no  hard- 
ship in  such  cases.  The  convenience  of  payment  may  of 
course  be  increased  by  the  English  method  of  allowing  pay- 
ment in  instalments;  but  in  Great  Britain  the  requirement 
of  a  low  rate  of  interest  on  deferred  payments  has  resulted 
in  payment  in  a  lump  sum  in  so  great  a  majority  of  cases 
as  to  throw  doubt  on  the  necessity  of  employing  the  in- 
stalment plan  at  all.  On  the  whole,  it  seems  safe  to  say 
that  the  inheritance  tax  is  paid  with  greater  ease  and  will- 
ingness than  most  other  taxes. 

Since  the  inheritance  tax  becomes  payable  while  the  prop- 
erty taxed  is  passing  under  the  eye  of  the  probate  court, 
this  mode  of  taxation  leaves  little  opportunity  for  fraud. 
During  the  settlement  of  an  estate  its  true  value  can  be  as- 
certained more  easily  and  more  accurately  than  at  any  other 
time;  and  it  often  happens  that  an  estate  consisting  largely 
of  personal  property  is  appraised  for  the  inheritance  tax 
at  many  times  the  figure  on  which  property  taxes  had  been 
paid  during  the  owner's  life.  It  is  not  only  from  the  stand- 
point of  the  revenue  produced  that  this  is  important;  the 
justice  of  a  tax  also  depends  upon  the  practicability  of  col- 
lecting it  in  all  cases  in  which  it  is  due. 

1  Equitable  Taxation,  p.  54. 


385]  ECONOMIC  THEORY  215 

The  appraisal  for  the  inheritance  tax  may  be  used  as  a 
check  on  the  property  or  income-tax  returns,  and  may  thus 
serve  to  prevent  fraud  in  those  forms  of  taxation  also. 

The  receipts  from  this  source  do  not  come  in  all  at  the 
same  time,  but  are  distributed  through  the  entire  year,  and 
there  are  comparatively  few  payments  in  proportion  to  the 
amount  of  revenue  received.  It  might  be  thought  that  the 
receipts  would  vary  greatly  from  year  to  year,  but  this  is 
true  only  in  small  tax  districts.  The  inheritance  tax  is  not 
suitable  for  a  local  tax,  except  possibly  in  the  case  of  very 
large  cities ;  as  a  state  tax,  especially  in  the  larger  common- 
wealths, the  returns  are  remarkably  constant  from  year  to 
year.  The  larger  the  taxing  districts,  the  greater  will  be 
the  tendency  to  regularity  in  the  product.  For  this  reason 
a  National  inheritance  tax  yields  revenue  with  even  greater 
regularity  than  the  state  taxes.  But  the  inheritance  tax 
should  not  be  reserved  for  temporary  or  occasional  use  in 
emergencies,  because  it  always  takes  a  year  or  two  at  least 
for  the  receipts  to  attain  the  normal  level.  Yet  this  tax 
has  the  advantage  of  elasticity,  for  an  increase  in  the  rate 
of  the  tax  cannot  diminish  the  death-rate ;  and  in  case  of  a 
great  war  it  might  be  expected  to  increase  automatically  to 
some  extent,  not  so  much  from  a  greater  number  of  deaths 
among  property-owners  as  from  a  greater  proportion  of 
collateral  successions  due  to  the  failure  of  direct  heirs. 

The  inheritance  tax  cannot  be  shifted.  There  are  no 
perplexing  questions  of  incidence  to  be  considered  in  con- 
nection with  it.  Its  effect  is  known  with  certainty;  the  in- 
heritance is  diminished  by  the  amount  of  the  tax.  In- 
dividuals may  make  a  special  effort  to  save  an  additional 
amount  because  of  the  tax,  but  this  is  not  an  effect  that 
can  be  relied  upon  as  generally  operative. 


2i6  THE  INHERITANCE  TAX  [386 

V.   Specific  Problems 

While  some  of  the  special  problems  which  arise  in  con- 
nection with  the  inheritance  tax  are  peculiar  to  it,  others 
are  similar  to  the  problems  of  taxation  in  general.  Even 
the  latter,  however,  may  require  a  different  solution  in  the 
case  of  the  inheritance  tax,  because  of  its  double  nature  as 
a  fiscal  exaction  and  as  a  regulation  of  inheritance. 

A  fundamental  question  not  without  difficulty  is :  Just 
what  is  to  be  regarded  as  an  inheritance  for  the  purpose  of 
taxation?  A  succession  is  sometimes  defined  as  any  bene- 
ficial interest  in  property  accruing  in  possession  or  ex- 
pectancy on  the  death  of  any  person.  The  English  law, 
which  is  very  complete  in  this  respect,  expressly  includes 
interest  accruing  by  survivorship  in  the  case  of  joint  owner- 
ship, by  power  of  appointment,  and  by  the  extinction  of 
determinable  charges.  Life  insurance  is  subject  to  estate 
duty,  though  expressly  excluded  from  liability  to  succession 
duty.  In  this  country  life-insurance  policies  have  been 
held  to  be  taxable  as  property  under  the  general  provisions 
of  the  New  York  law,  but  not  under  the  National  legacy 
tax.^  Where  life  insurance  is  resorted  to  as  a  form  of  in- 
vestment and  very  large  policies  are  sometimes  taken  out, 
there  seems  little  more  reason  to  exempt  them  than  other 
investments.  The  exemptions  allowed  direct  heirs  are  usu- 
ally sufficient  to  cover  ordinary  amounts  of  life  insurance, 
but  it  would  of  course  be  possible  to  allow  an  additional 
exemption  of  moderate  amounts  of  life  insurance  payable  to 
the  immediate  family  of  the  deceased,  without  exempting 
large  investments  of  this  character. 

Since  the  clear  value  of  the  succession  is  what  it  is  in- 
tended to  tax,  the  decedent's  debts  are  to  be  deducted  from 
the  assets  of  his  estate.  This  rule  does  not  always  apply 
in  the  case  of  mere  probate  fees. 

1  Matter  of  Klnoedler,  140  N.  Y.  379;  3  Internal  Revenue  Record  140. 


387]  ECONOMIC  THEORY  21/ 

In  some  countries,  especially  where  the  inheritance  tax 
is  part  of  a  system  of  taxes  on  transfers  of  property,  it  is 
supplemented  by  a  tax  on  gifts  inter  vivos,  at  least  in  so 
far  as  such  gifts  are  made  a  matter  of  public  record. 
Merely  for  the  purpose  of  preventing  evasion  of  the  in- 
heritance tax,  it  seems  to  be  sufficient  to  make  the  tax  ap- 
plicable to  gifts  made  in  contemplation  of  death,  or  in- 
tended to  take  effect  after  the  death  of  the  donor.  Some 
statutes  presume  gifts  made  within  a  year  of  death  to  have 
been  gifts  causa  mortis. 

In  some  European  countries  there  are  taxes  on  the  prop- 
erty of  corporations,  in  lieu  of  the  inheritance  taxes  paid 
by  individuals.  It  may  perhaps  be  considered  that  the  im- 
mortality conferred  upon  corporations  is  analogous  to  the 
privilege  of  inheritance,  and  justifies  a  similar  tax;  but 
such  taxes  probably  result  rather  from  the  desire  to  reach 
property  that  would  otherwise  yield  no  taxes.  The  privi- 
lege of  legal  immortality  and  perpetual  succession  may 
properly  be  taken  into  account  in  fixing  the  tax  to  be  paid 
on  the  organization  of  a  corporation;  but  justice  does  not 
require  an  additional  tax  on  corporations  in  lieu  of  the  in- 
heritance tax,  because  the  stock  and  bonds  of  stock  com- 
panies become  subject  to  the  inheritance  tax  at  the  death  of 
their  owners,  while  the  exemption  of  societies  other  than 
business  corporations  may  be  explained  as  a  matter  of 
public  policy. 

VI.  Graduation  According  to  Relationship 
The  graduation  of  inheritance  taxes  according  to  rela- 
tionship is  nearly  universal  in  practice,  and  has  a  sound 
basis  in  theory.  It  may  be  explained  by  the  extension-of- 
escheat  argument,  since  the  reasons  for  the  institution  of 
inheritance  increase  with  the  nearness  of  the  relationship; 
by  the  value-of-service  argument,  for  property  might  often 


2i8  ^i^HE  INHERITANCE  TAX  [388 

be  transmitted  in  the  direct  line  even  without  laws  of  in- 
heritance; and  by  the  accidental-income  argument,  because 
whether  the  devolution  of  property  indicates  an  increase  of 
tax-paying  ability  depends  largely  on  the  relationship  of 
the  heir  to  the  decedent.  It  cannot  be  explained  by  any 
theory  which  regards  the  inheritance  tax  as  paid  in  lieu 
of  annual  taxes,  without  recourse  to  one  of  these  other  ar- 
guments to  justify  the  heavier  taxation  of  collateral  heirs; 
but  the  objections  sometimes  adduced  against  inheritance 
taxes  would  undoubtedly  have  considerable  force  if  the  im- 
mediate families  of  decedents  were  taxed  as  heavily  as  col- 
lateral relatives.  The  practical  legislator  will  take  into 
consideration  the  fact  that  it  is  much  easier  to  collect  a 
high  tax  from  collateral  than  from  direct  heirs.  Where 
the  graduation  according  to  relationship  exists  it  is  found 
that  the  highest  taxes  are  paid  with  the  least  reluctance. 

Graduation  according  to  relationship  therefore  seems 
both  equitable  and  necessary,  if  direct  heirs  are  to  be  taxed 
at  all.  To  what  extent  the  graduation  should  be  carried 
is  a  more  difficult  question.  As  a  matter  of  fact,  in  case 
of  intestacy  the  rate  always  rises  at  some  point  to  one  hun- 
dred per  cent,  either  where  the  knowledge  of  kinship  ends 
or  at  some  point  fixed  by  law  beyond  which  intestate  in- 
heritance does  not  extend ;  and  this  point  might  well  be 
fixed  so  as  to  limit  inheritance  to  those  degrees  of  relation- 
ship between  which  there  is  a  conscious  bond  of  kinship. 
For  the  degrees  between  which  inheritance  is  to  operate  at 
all  three  or  four  classes  ought  to  be  sufficient;  one  rate  for 
the  widow  and  direct  heirs  (possibly  with  some  discrim- 
ination in  favor  of  minor  children),  one  for  brothers  and 
sisters  and  other  very  near  collateral  relatives,  and  one  for 
more  distant  relatives  and  strangers.  The  relative  claims 
of  remote  heirs  can  scarcely  be  determined  with  such  nicety 
as  to  make  a  dozen  different  rates  more  equitable  than  four. 


389]  ECONOMIC  THEORY  219 

The  claims  of  adopted  children  and  of  relatives  by  marriage 
should  not  be  forgotten,  though  opinions  may  not  agree 
concerning  them. 

It  has  been  suggested  that  nephews  and  nieces,  for  ex- 
ample, should  pay  at  a  lower  rate  than  uncles  and  aunts, 
"  because  affection  flows  in  far  larger  measure  from  above 
downward  than  in  the  opposite  direction,"  the  children  of  a 
deceased  brother  or  sister  taking  the  latter's  place  in  the 
affections  of  their  uncles  and  aunts. ^  Statutes  do  commonly 
make  this  distinction,  and  many  of  the  German  laws  dis- 
criminate in  like  manner  even  between  parents  and  off- 
spring; but  the  justice  of  such  distinctions  may  well  be 
questioned.  The  true  basis  for  the  lighter  taxation  of  cer- 
tain heirs  is  not  the  affection  felt  for  them  by  the  decedent, 
but  the  same  relations  of  economic  interdependence  which 
justify  intestate  inheritance  and  compulsory  support  of  in- 
digent relatives ;  and  the  duty  of  support  is  reciprocal.  No 
one  is  entitled  to  a  lower  rate  than  the  decedent's  surviving 
parents,  unless  it  may  be  his  minor  children.  Moreover,  if 
there  is  any  force  in  the  view  that  the  tax  is  on  the  prop- 
erty rather  than  on  individuals^  it  should  be  considered  that 
property  inherited  by  elderly  persons  is  likely  soon  to  be- 
come subject  to  another  inheritance  tax. 

VII.  Exemptions 
Whether  direct  heirs  are  to  be  taxed  at  all  must  depend 
very  largely  upon  fiscal  considerations.  The  reasons  which 
justify  graduation  according  to  relationship  lead  also  to  the 
conclusion  that  the  entire  exemption  of  direct  heirs  is  no 
injustice;  but  as  the  great  majority  of  successions  are  be- 
tween immediate  relatives,  their  exemption  will  have  a  very 
decided  effect  upon  the  revenue.     The  exemption  is  some- 

1  Theodor  Hilgard,   Zzvolf  Paragraphen   Uber  Pauperismus  und  die 
Mittel,  ihm  zu  steuern,  1847. 


220  THE  INHERITANCE  TAX  [3Q0 

times  extended  to  brothers  and  sisters,  and  even  to  nephews 
and  nieces;  but  when  it  is  carried  so  far  as  this  there  is 
little  left  to  tax.  Indeed,  an  inheritance  tax  is  of  com- 
paratively slight  importance  unless  it  extends  to  direct 
heirs;  but  when  they  are  included  there  should  be  an  exemp- 
tion of  a  sufficient  amount  to  prevent  hardship.  The 
amount  of  the  exemption  must  of  course  be  fixed  more  or 
less  arbitrarily.  It  would  seem,  however,  that  for  the 
widow  and  minor  children  the  exempt  amount  should  be 
such  as  to  yield  a  revenue  sufficient  for  support.  Very 
small  amounts  going  to  collateral  relatives  may  also  well  be 
exempted,  if  only  as  a  matter  of  convenience. 

The  exemption  may  be  based  upon  the  size  either  of  the 
entire  state  or  of  the  separate  shares,  or  both  facts  may  be 
taken  into  consideration.  This  is  a  point  so  commonly  left 
obscure  in  carelessly  drawn  statutes  that  it  has  very  often 
been  referred  to  the  courts  for  construction,  and  it  has 
sometimes  been  determined  without  much  regard  for  the 
language  employed.  The  basis  of  the  exemption  will  natur- 
ally depend  upon  the  view  of  the  character  of  the  tax  held 
by  the  legislature.  If  the  inheritance  tax  be  considered 
as  a  payment  of  back  taxes,  the  estate  will  of  course  be 
taxed  as  a  whole ;  but  the  principle  of  ability  indicates  that 
the  determining  factor  should  be  the  size  of  the  separate 
shares.  The  size  of  the  whole  estate  obviously  makes 
little  difference  to  the  individual  heirs  except  as  it  affects 
the  size  of  their  several  portions.  By  the  application  of 
the  exemption  to  each  share,  in  the  case  of  direct  inherit- 
ances, the  effect  of  the  size  of  the  family  upon  tax-paying 
ability  can  be  practically  recognized  more  conveniently  than 
in  any  other  form  of  taxation. 

An  amount  equal  to  the  exemption  should  be  deducted 
from  the  value  of  all  inheritances  which  are  taxed ;  for 
otherwise  a  difference  of  a  few  dollars  in  an  inheritance 


391  ]  ECONOMIC  THEORY  221 

may  require  the  payment  of  a  tax  even  greater  than  the 
difference.  This  is  a  rule  which  holds  true  of  taxation  in 
general,  but  it  applies  with  especial  force  to  the  inherit- 
ance tax  because  of  the  greater  size  of  the  exemptions. 
The  neglect  of  this  principle  in  framing  particular  inherit- 
ance-tax laws  has  called  forth  some  of  the  strongest  argu- 
ments which  have  been  advanced  against  them,  and  the 
resulting  inequality  has  even  been  held  to  be  unconstitu- 
tional. 

Bequests  for  public,  benevolent,  and  educational  pur- 
poses may  well  be  exempted,  for  in  such  cases,  if  the  gift 
is  wise,  the  whole  amount  accrues  to  the  benefit  of  the 
community.  It  is  not  good  public  policy  to  tax  a  bequest 
for  a  public  purpose  more  than  a  bequest  to  an  individual, 
even  a  direct  heir;  and  it  is  rather  inconsistent  to  demand 
any  inheritance  tax  from  an  institution  whose  beneficent 
•ojffices  have  led  it  to  be  exempted  from  other  taxation. 

VIII.  Progressive  Rates 
The  question  of  progression  in  the  inheritance  tax  is  in 
some  sense  a  part  of  the  question  of  progressive  taxation 
in  general;  yet  many  writers  and  statesmen  have  consid- 
ered inheritances  a  peculiarly  fit  subject  for  progressive 
taxation.     On  this  point  Mill  wrote  as  follows: 

It  is  not  the  fortunes  which  are  earned,  but  those  which  are 
unearned,  that  it  is  for  the  public  good  to  put  under  limitation. 
...  I  conceive  that  inheritances  and  legacies,  exceeding  a  cer- 
tain amount,  are  highly  proper  subjects  for  taxation:  and  that 
the  revenue  from  them  should  be  as  great  as  it  can  be  made 
without  giving  rise  to  evasions,  by  donation  inter  vivos  or  con- 
cealment of  property,  such  as  it  would  be  impossible  adequately 
to  check.  The  principle  of  graduation  (as  it  is  called),  that  is, 
of  levying  a  larger  percentage  on  a  larger  sum,  though  its  appli- 
cation to  general  taxation  would  be,  in  my  opinion,  objection- 


222 


THE  INHERITANCE  TAX 


[392 


able,  seems  to  me  both  just  and  expedient  as  applied  to  legacy 
and  inheritance  duties.^ 


An  inheritance  tax  imposed  for  the  purpose  of  diffusing 
wealth  will  necessarily  be  progressive,  for  otherwise  it 
would  diminish  small  successions  in  the  same  proportion  as 
large  ones;  and  it  might  even  be  so  contrived  as  to  limit 
inheritance  and  bequest  absolutely.  For  example,  if  it 
were  desired  to  fix  the  limit  in  the  neighborhood  of  half 
a  million  dollars,  the  end  could  be  accomplished  by  means 
of  a  progressive  inheritance  tax  levied  according  to  some 
such  schedule  of  rates  as  the  following: 


Per  cent. 

On  the  first       $10,000 0 

"        second    10,000 I 

"        third       10,000 2 

"        fourth    10,000 3 

"        fifth        10,000 4 

"        sixth       10,000 5 

"       seventh  10,000 6 

"       eighth     10.000 7 

"        ninth       10.000 8 

"        tenth       10,000 10 


On  the  sixth 
"      fifth 
"       fourth 
"      fifth 
"      sixth 


Per  cent. 

^20,000 12 

30.000 15 

50,000 20 

50,000 25 

50,000 30 


fourth   100,000 40 

fifth       100,000 50 

sixth      100,000 60 

fifth       150,000 75 

fourth  250,000 90 

excess  above  $1,000,000  100 


This  scale  would  make  the  largest  amount  possible  to  in- 
herit somewhat  less  than  half  a  million  dollars ;  namely, 
$463,500.  Of  course  the  limit  could  be  fixed  at  any  desir- 
able point. 

One  objection  which  has  been  raised  against  progressive 

1  Principles  of  Political  Economy,  bk.  v,  chap,  ii,  §  3.  In  the  first 
edition  Mill's  opposition  to  progressive  taxation  in  general  is  more  pro- 
nounced, and  his  advocacy  of  progressive  inheritance  taxes  less  em- 
phatic: "The  principle  of  graduation  (as  it  is  called),  that  is,  of  levy- 
ing a  larger  percentage  on  a  larger  sum,  though  its  application  to 
general  taxation  would  be  a  violation  of  first  principles,  is  quite  unob- 
jectionable as  applied  to  legacy  and  inheritance  duties." 


393]  ECONOMIC  THEORY  223 

taxation  in  general  is  that  it  has  no  logical  limit.  This 
objection  will  not  apply  to  a  scale  which  is  carried  to  one 
hundred  per  cent.  The  scale  is  still  arbitrary,  it  is  true; 
the  point  at  which  the  inheritance  is  to  be  limited  must  be 
fixed  by  considerations  of  general  policy.  But  one  hun- 
dred per  cent  is  not  an  arbitrary  point  at  which  to  discon- 
tinue the  progression,  for  to  go  beyond  that  point  would  be 
to  make  a  larger  inheritance  less  than  a  smaller  one. 

Such  high  rates  will  hardly  be  applied  to  property  or  in- 
come taxes,  but  their  application  to  inheritance  taxes  would 
be  a  much  less  extreme  measure,  for  it  would  act  as  a  re- 
striction only  on  the  inheritance  of  property,  leaving  the 
rights  of  independent  acquisition  and  possession  untouched. 
While  a  limitation  of  the  right  of  property  itself  would  be 
a  radical  step  toward  equality  of  wealth,  a  limitation  of  in- 
heritance would  be  only  a  step  toward  equality  of  oppor- 
tunity. Inheritance  evidently  serves  a  useful  purpose  in 
so  far  as  it  gives  young  men  a  fair  start  in  life  and  pro- 
vides for  the  needs  of  widows  and  young  children;  further 
than  that  it  is  difficult  to  justify  it  by  any  consideration  of 
social  expediency.  Not  only  are  inheritance  and  bequest 
no  necessary  part  of  the  institution  of  private  property, 
but  the  reasons  which  justify  private  property  have  little 
application  to  them.  Private  property  is  a  necessary  and 
useful  institution  because  it  promotes  industry.  Can  this 
be  said  of  inheritance? 

There  are  at  least  three  rather  distinct  types  of  young 
men  who  inherit  fortunes.  Those  who  have  been  brought 
up  in  their  fathers'  business,  and  whose  tastes  and  training 
are  both  in  the  direction  of  business  affairs,  may  make  a 
better  use  of  their  wealth  than  their  fathers  did.  To  a  man 
of  another  type,  educated  in  the  schools  and  with  a  de- 
veloped ethical  sense,  but  with  no  special  training  and  little 
inclination  for  business,  sudden  responsibility  for  the  wel- 


224  ^-^^  INHERITANCE  TAX  [394 

fare  of  hundreds  of  employees  and  for  the  financial  stand- 
ing of  the  firm  or  company  sometimes  comes  as  a  burden 
almost  greater  than  he  can  bear.  The  third  class,  probably 
larger  than  either  of  the  others,  consists  of  those  whose 
idea  of  the  use  of  money  is  spending  it  in  selfish  gratifica- 
tion. The  demoralizing  effect  of  wealth  upon  this  class  is 
too  conspicuous  to  need  proof ;  but  a  far  more  wide-reach- 
ing danger  lies  in  the  possible  disturbance  of  business 
through  the  whims  and  inexperience  of  hereditary  stock- 
holders and  directors.  Scholars  and  business  men  unite 
in  calling  attention  to  this  danger.  A  leading  sociologist 
who  insists  upon  the  fiduciary  character  of  the  managerial 
element  in  capitalistic  interprise  ^  predicts  that  for  a  father 
to  bequeath  to  his  son  a  controlling  interest  in  a  factory 
or  a  railroad  will  sometime  be  perceived  to  be  "  mon- 
strous." "  Many  will  agree  with  him  at  least  as  regards 
the  railroad  and  other  public-service  corporations.  Mr. 
Carnegie  applies  the  same  principle  to  banking  and  other 
business,  saying: 

The  fond  parent  who  invests  his  son  with  imaginary  busi- 
ness qualifications,  and  places  him  in  charge  of  affairs — upon 
the  successful  management  of  which  the  incomes  of  thousands 
depend — incurs  a  grave  responsibility.  Most  of  the  disastrous 
failures  of  the  day  arise  from  this  very  cause.  It  is  as  un- 
just to  the  son  as  to  the  community.  Out  of  seven  serious 
failures  during  a  panic  in  New  York,  five  were  traced  to  this 
root.     One  of  these  sons  is  an  exile  to  escape  punishment  for 

breaking  a  law   which  he   did  not  clearly  understand 

The  banker  who  hands  over  his  business  to  sons,  because  they 
are  sons,  is  guilty  of  a  great  offense.^ 

1  American  Journal  of  Sociology,  i :  578-581. 

-'Albion  W.  Small,  "Private  Business  is  a  Public  Trust,"  American 
Journal  of  Sociology,  i  :  276,  287. 
3  The  Gospel  of  Wealth,  p.  56. 


395]  ECONOMIC  THEORY  225 

The  existence  of  aristocracies  and  leisure  classes  has  some- 
times been  historically  justified  by  the  salutary  consequences 
of  their  recognition  of  the  principle  that  noblesse  oblige; 
but  in  America  the  responsibilities  of  wealth  are  so  rarely 
recognized  that  our  aristocracy  of  wealth  bids  fair  to  make 
itself  quite  unendurable. 

There  is  one  possible  point  of  view  from  which  inherit- 
ance may  be  regarded  as  a  necessary  part  of  the  right 
of  private  property.  If  property  be  regarded  as  belong- 
ing to  the  family  as  a  whole  rather  than  to  any  of  the 
individual  members,  unrestricted  inheritance  within  the 
family  follows  almost  as  a  necessary  consequence.  But  in 
America  the  right  of  inheritance  within  the  family  is  al- 
ready greatly  restricted  by  an  almost  unlimited  freedom  of 
bequest;  a  system  of  law  which  recognizes  no  Pflichtthcils- 
recht  or  portion  legitime  cannot  be  said  to  rest  upon  the 
family  idea  of  property.  Our  whole  system  of  descent  and 
distribution  seems  to  be  contrived  not  so  much  to  secure 
any  rights  to  the  surviving  family  as  to  carry  out  the  sup- 
posed wishes  of  the  deceased.  Of  the  two  institutions,  in- 
heritance and  bequest,  inheritance  is  the  older  historically, 
and  would  seem  to  have  the  better  reason  for  its  existence. 
Its  basis  is  found  in  the  fundamental  facts  of  family  life, 
and  in  the  duty  of  support  which  the  father  owes  the  chil- 
dren. It  does  not  follow,  however,  that  even  the  right  of 
inheritance  within  the  family  should  be  unlimited.  No 
ethical  or  economic  necessity  requires  a  wealthy  father  to 
leave  all  his  accumulations  of  a  life-time  to  his  sons;  it 
may  be  better  for  them  in  every  way  to  be  left  with  only  a 
moderate  amount  of  property.  The  inheritance  of  a  large 
fortune  is  less  apt  to  prove  an  incentive  to  industry  than 
an  encouragement  to  idleness  and  dissipation. 

The  limitation  of  inheritance  through  progressive  taxa- 
tion is  thus  abundantly  justified.     But  a  moderately  pro- 


226  THE  INHERITANCE  TAX  [3^5 

gressive  inheritance  tax  need  not  be  considered  a  limitation 
of  inheritance;  it  may  be  explained  and  justified  by  the  gen- 
eral principles  of  taxation.  Progression  is  sometimes  de- 
fended on  the  "  compensator}^  "  theory  as  a  compensation 
for  state  interference,  on  the  ground  that  inequalities  of 
fortune  are  due  in  part  to  positive  law  and  state  action ;  or 
on  what  has  been  termed  the  "  special-compensatory " 
theory  as  tending  to  counterbalance  the  inequality  of  taxes 
which  fall  more  heavily  on  the  poor  than  on  the  rich.  If 
the  inheritance  tax  be  regarded  as  a  payment  of  back  taxes, 
the  justice  of  progression  is  especially  evident,  because 
large  fortunes  undoubtedly  escape  taxation  during  the  own- 
ers' lives  to  a  greater  extent  than  small  ones.  Yet  this  is 
only  another  way  of  saying  that  taxation  in  general  is  actu- 
ally regressive ;  and  while  the  back-taxes  argument  has  little 
weight  as  far  as  justice  between  individuals  is  concerned, 
as  applied  in  this  way  to  whole  classes  of  tax-payers  it  has 
undoubted  force.  Finally,  prog'ressive  inheritance  taxes, 
like  other  progressive  taxes,  may  be  explained  on  the  theory 
of  marginal  utility,^  or  on  the  simple  principle  that  tax- 
paying  ability  increases  more  rapidly  than  wealth,  or  that 
the  sacrifice  involved  in  paying  a  proportional  tax  is  less  for 
the  wealthy  than  for  the  poor.  All  the  arguments  for  pro- 
gressive taxation  in  general  apply  with  full  force  to  the  in- 
heritance tax,  and  seem  thoroughly  to  justify  progression. 
It  is  to  be  considered,  too,  that  in  the  case  of  the  inheritance 
tax  progression  is  eminently  practicable,  while  its  applica- 
tion to  some  other  forms  of  taxation  would  be  attended 
with  much  greater  difficulty. 

The  most  effective  argument  against  progressive  taxa- 
tion is  what  may  be  called  the  political  argument,  which  has 

1  For  these  various  theories  see  Seligman,  Progressive  Taxation,  or 
"  The  Theory  of  Progressive  Taxation,"  Political  Science  Quarterly, 
June.  1893, 


397]  ECONOMIC  THEORY  22/ 

been  most  ably  presented  by  Mr.  Lecky  in  Great  Britain 
and  by  Mr.  William  D.  Guthrie  in  this  country.  Mr.  Lecky 
is  by  no  means  unqualifiedly  opposed  to  progressive  taxa- 
tion, but  he  has  uttered  the  following  warning  against 
carrying  it  too  far : 

Highly  graduated  taxation  realises  most  completely  the  su- 
preme danger  of  democracy,  creating  a  state  of  things  in  which 
one  class  imposes  on  another  burdens  which  it  is  not  asked  to 
share,  and  impels  the  State  into  vast  schemes  of  extravagance, 
under  the  belief  that  the  whole  cost  will  be  thrown  upon  others.^ 

Arguing  before  Governor  Black  of  New  York  against  the 
progressive  inheritance-tax  bill  passed  by  the  legislature 
in  1897,  Mr.  Guthrie  said : 

The  great  danger  of  all  democracies  is  that  one  class  votes 
the  taxes  for  another  class  to  pay.  Heretofore,  our  bulwark 
has  been  that,  as  all  taxes  were  equally  and  uniformly  imposed, 
classes  could  not  be  discriminated  against,  and  this  protected 
all.  .  .  .  Introduce  the  policy  of  graduated  taxes,  establish  the 
doctrine  that  they  are  permissible  under  our  system,  and  the 
whole  burden  of  taxation  can  be  thrown  on  a  few  rich. 

The  only  possible  answer  to  this  argument  is  that  in  none 
of  the  countries  in  which  progressive  taxation  has  been 
employed  has  it  been  carried  to  such  extremes  as  to  oppress 
the  rich,  nor  do  democratic  legislatures  in  other  respects 
often  show  flagrant  disregard  for  property  rights.  The 
distrust  of  democracy  expressed  in  Mr.  Guthrie's  warning 
is  natural  enough,  and  not  irrational  as  an  a  priori  theory, 
but  it  has  no  foundation  in  history  or  comparative  legisla- 
tion. Governor  Black  carried  it  to  its  logical  conclusion 
when  he  declared :  "  In  this  country  the  right  of  suffrage 
ir^  carried  too  far." 

1  Democracy  and  Liberty,  i,  347. 


228  THE  INHERITANCE  TAX  [3^g 

Equity  requires  that  each  rate  in  a  progressive  schedule 
should  be  applied  only  to  its  respective  fraction  of  the  in- 
heritance; that  is,  only  to  the  excess  above  the  amount  to 
which  the  next  lower  rate  applies.  Otherwise,  the  pro- 
gressive scale  will  result  in  unnecessary  inequalities,  its 
effect  being  in  some  cases  to  make  a  larger  inheritance 
actually  less  than  a  smaller  one.  It  is  contrary  to  all  jus- 
tice to  levy  the  higher  rates  on  the  entire  inheritance.  The 
only  disadvantage  of  the  method  of  fractional  progression, 
as  compared  with  the  other,  is  that,  the  rates  being  the 
same,  the  revenue  will  be  less;  but  the  same  revenue  can 
be  secured  by  simply  increasing  the  rates.  There  is  no 
occasion  to  take  fright  at  the  nominally  high  percentages 
of  a  fractionally  progressive  scale,  for  the  actual  tax  will 
always  fall  below  the  maximum  percentage.  The  Wiscon- 
sin schedule,  which  has  already  been  copied  by  California 
and  Idaho,  is  a  good  model  for  other  states  to  follow,  in 
form  even  if  not  in  the  actual  figures  employed. 

IX.  Calculation  of  Revenue 

Although  some  estates  become  liable  to  inheritance  taxes 
oftener  than  others,  it  is  true  on  an  average  that  an  amount 
of  property  equal  to  the  total  privately-owned  wealth  of  a 
country  changes  hands  by  inheritance  or  bequest  once  in  a 
generation,  the  length  of  a  generation  in  this  sense  of  the 
word  being  the  number  of  years  by  which  children  on  an 
average  survive  their  parents.  This  is  practically  equiva- 
lent to  the  average  age  of  parents  at  the  births  of  their  chil- 
dren; for,  assuming  that  the  average  duration  of  life  does 
not  materially  change  from  one  generation  to  the  next,  chil- 
dren will  follow  their  parents  in  death  by  the  same  number 
of  years  as  in  birth.  A  number  of  calculations  based  upon 
the  vital  statistics  of  France  practically  confirm  the  tradi- 


399]  ECONOMIC  THEORY  229 

tional  rule  of  three  generations  to  a  century ;  Mf  the  estimate 
of  Herodotus  was  accurate  at  the  time  it  was  made  it  has 
not  been  modified  as  much  as  might  be  expected  by  later 
marriages  and  increased  duration  of  life,  which,  indeed, 
may  have  offset  each  other. 

The  average  survival  of  heirs  to  their  predecessors  may 
not  be  quite  the  same  as  the  average  survival  of  children  to 
parents,  but  the  cases  in  which  property  descends  directly 
to  grandchildren  should  be  nearly  counterbalanced  by  those 
in  which  it  passes  to  parents  or  members  of  the  same  gener- 
ation as  the  decedent,  and  an  abnormally  long  interval  be- 
tween successions  is  almost  sure  to  be  followed  by  one  ab- 
normally short.  De  Foville  calculated  the  interval  between 
successions  as  being  thirty-six  years." 

Without  trying  to  be  too  precise,  it  may  be  estimated  that 
from  one  thirty-third  to  one  thirty-sixth  of  the  privately- 
owned  wealth  of  a  country  will  change  hands  annually  by 
inheritance,  bequest,  or  gift  causa  mortis;  or,  allowing  for 
bona-fide  gifts  inter  vivos  too  much  in  advance  of  death  to 
be  reached  by  inheritance  taxes,  at  least  one-fortieth  of  the 
privately-owned  wealth  would  become  subject  to  such  taxes 
every  year,  if  there  were  no  exemptions.  Giffen's  estimate 
of  the  wealth  of  Great  Britain  based  on  the  income-tax  re- 
turns was  about  equal  to  fifty  times  the  amount  becoming 
subject  to  death  duties  each  year,^  but  all  legacies  under  the 
value  of  twenty  pounds  were  exempt.     The  generous  ex- 

^  Adolphe  Coste,  "Observations  sur  la  statistique  successorale,"  Jour- 
nal de  la  Societe  de  Statistique  de  Paris,  40 :  188.  The  mathematician 
Fourier  found  the  length  of  a  generation  in  Paris  to  be  33.31  years; 
Vacher  obtained  33.06  years  for  the  whole  of  France,  while  Turquan 
made  it  34  years,  i  month  and  6  days  (25  years  9  months  for  the 
mothers  of  illegitimate  children)  ;  weighted  average,  33.37  years. 

"^Journal  de  la  Societe  de  Statistique  de  Paris  (Aug.  1882). 

3  Essays  in  Finance,  pp.  181,  182. 


230  THE  INHERITANCE  TAX  [400 

emptions  of  American  tax  laws  introduce  a  complication  for 
which  it  is  difficult  to  make  accurate  allowance,  since  the  dis- 
tribution of  wealth  varies  from  place  to  place  and  is  known 
for  comparatively  few  states.  Spahr's  researches  appear  to 
indicate  that  an  exemption  of  all  estates  below  $5,000  in 
value  would  eliminate  only  one-thirteenth  of  the  wealth  pro- 
bated in  the  State  of  New  York,  but  in  Massachusetts  one- 
ninth  would  be  eliminated  by  a  similar  exemption,  or  one- 
fifth  by  an  exemption  of  all  below  $10,000.^  The  propor- 
tion of  the  privately-owned  wealth  of  either  state  annually 
becoming-  subject  to  inheritance  taxes  should  be  at  least 
one-fiftieth,  even  if  the  $10,000  exemption  applied  to  all 
estates. 

The  allowance  to  be  made  for  different  rates  applying  to 
different  classes  of  relatives  is  comparatively  simple.  We 
know  that  two-thirds  of  the  personal  property  and  three- 
fourths  of  the  real  estate  which  passes  by  inheritance  or  be- 
quest goes  to  direct  heirs,  and  if  necessary  the  small  fraction 
passing  to  collateral  heirs  may  be  subdivided  according  to 
the  degree  of  relationship ;  -  but  the  revenues  which  an  in- 
heritance tax  should  yield  may  be  approximately  estimated 
mainly  on  the  basis  of  the  rate  for  direct  heirs,  especially 
where  it  applies  to  brothers  and  sisters  also.  Thus  where 
direct  heirs  are  taxed  one  per  cent,  with  a  $10,000  exemp- 
tion, and  collateral  heirs  at  higher  rates,  it  is  safe  to  say  that 
the  tax  should  yield  annually  somewhat  more  than  one- 
five-thousandth  of  the  privately-owned  wealth  of  the  state. 
That  this  estimate  is  by  no  means  excessive  is  shown  by  the 
experience  of  New  York,  which,  with  taxable  property  esti- 
mated by  the  Census  Bureau  to  be  worth  $13,440,000,000 
(besides  securities  representing  much  property  in  other 
states),   receives   in   inheritance  taxes   about  $5,000,000   a 

1  Present  Distribution  of  Wealth  in  the  United  States,  pp.  64,  179,  180. 

2  See  pp.  93,  94,  96,  supra. 


40l]  ECONOMIC  THEORY  23I 

year,  a  ratio  of  i  to  2688.  An  examination  of  the  tables  in 
the  appendix  will  show  that  some  of  the  states,  however,  re- 
ceive much  less  from  this  source  than  they  should  receive. 

The  annual  receipts  from  the  National  tax  on  legacies 
and  distributive  shares  of  personal  property  also  approxi- 
mated $5,000,000  when  the  taxing  machinery  was  in  good 
working  order.  This  was  only  about  one  seventy-two 
hundredth  of  the  personal  property  in  the  country  (shares 
of  railroads  and  other  public-service  corporations  being 
counted  as  personalty),  but  in  some  parts  of  the  country  the 
exemption  of  all  personal  estates  below  $10,000  in  value 
very  materially  cuts  down  the  amount  of  property  subject  to 
the  tax.  The  tables  in  the  appendix  show  that  in  most  of 
the  states  the  state  taxes  yield  more  revenue  than  did  the 
National  tax,  which  applied  to  personal  property  only.  In 
Connecticut,  however,  the  state  tax  is  levied  at  such  low 
rates  and  with  such  generous  exemptions  for  direct  as  well 
as  collateral  heirs  that  it  yields  less  than  the  National  tax 
did ;  while  in  Montana  the  comparative  unimportance  of  the 
state  tax  is  due  at  least  partly  to  its  application  in  the  case 
of  direct  heirs  to  personal  property  alone.  In  Nebraska, 
however,  the  meager  returns  indicate  either  a  wonderfully 
healthful  climate  or  very  lax  administration. 

X.  Conclusion 
The  inheritance  tax  seems  to  be  pre-eminently  an  institu- 
tion of  democracy.  It  is  found  in  nearly  every  civilized 
country  on  the  globe,  but  it  is  mainly  in  the  most  democratic 
countries — Great  Britain,  France,  Switzerland,  Canada,  the 
Australasian  colonies — that  it  reaches  its  fullest  develop- 
ment, with  high  progressive  rates,  and  becomes  an  import- 
ant source  of  revenue.  The  United  States  seemed  until 
lately  to  be  an  exception  to  this  rule,  but  the  increasing 
popularity  of  this  mode  of  taxation  and  its  rapid  extension 


232  THE  INHERITANCE  TAX  [402 

from  state  to  state  during  recent  years  has  radically  changed 
the  situation. 

That  the  inheritance  tax  is  very  commonly  regarded 
as  something  more  than  a  purely  fiscal  measure  is  shown 
by  frequent  proposals  to  use  the  proceeds  for  certain 
benevolent  or  educational  purposes.  Such  proposals  have 
sometimes  borne  fruit  in  legislation.  It  is  interesting  to 
note  that  the  earliest  inheritance  tax  of  w^hich  v^e  have  any 
definite  knov^^ledge  was  for  the  purpose  of  pensioning  old 
soldiers,  and  that  some  of  the  recent  enactments  on  the  sub- 
ject in  the  United  States  and  Canada  have  been  for  charit- 
able and  educational  purposes.  In  a  small  state,  it  would 
be  unwise  to  make  these  special  funds  wholly  dependent  on 
the  inheritance  tax,  because  the  receipts  would  be  apt  to  be 
irregular  in  amount ;  but  there  can  be  no  objection  to  mak- 
ing the  proceeds  of  this  tax  part  of  a  special  fund  which  is 
supplied  from  other  sources  also. 

The  inheritance  tax  seems  admirably  adapted  to  replace 
the  antiquated  personal-property  tax  in  the  state  budgets. 
The  experience  of  New  York  with  the  inheritance  tax,  and 
the  experience  of  a  number  of  states  with  corporation  taxes, 
show  that  by  these  two  methods  of  taxation  alone  most  if 
not  all  of  the  state  governments  could  pay  all  their  ex- 
penses, leaving  the  taxes  on  property  to  the  local  political 
divisions.  Such  a  separation  of  state  and  local  revenues 
is  most  desirable;  it  would  do  away  with  the  necessity  of 
apportionment  and  with  the  farce-comedy  called  state 
"  equalization,"  and  would  make  it  possible  to  grant  to  the 
localities  some  degree  of  self-government  in  matters  of 
taxation. 

As  long  as  the  state  inheritance  taxes  are  no  heavier  than 
at  present,  a  Federal  tax  might  perhaps  be  superimposed 
upon  them,  as  was  done  temporarily  during  the  Spanish 
war,  without   making  the  burden   excessive.     The  special 


403]  ECONOMIC  THEORY  233 

reasons  which  make  a  separation  of  state  and  local  revenues 
desirable  do  not  apply  to  the  case  of  state  and  National 
taxation.  It  would  be  very  unfortunate  if  the  imposition 
of  a  National  inheritance  tax  should  retard  the  develop- 
ment of  inheritance  taxes  among  the  states,  where  they 
are  needed  as  an  aid  in  improving  the  general  system  of 
taxation;  but  it  is  worthy  of  note  that  in  1901,  with  the 
heavy  war  tax  still  on  the  statute  book,  seven  states  adopted 
this  mode  of  taxation,  while  two  others  emphasized  anew 
their  reliance  upon  it — Maine  by  increasing  the  rate  and 
Massachusetts  by  repealing  an  exemption  in  favor  of  small 
estates.  No  other  year  before  or  since  can  equal  this  re- 
cord. Possibly  the  National  tax  was  assumed  to  be  a 
temporary  measure;  and  again,  some  states  may  have 
waited  for  the  repeal  of  the  war  revenue  act,  though  the 
statistics  make  it  seem  improbable.  But  while  "  both  the 
National  and  the  state  governments,  moving  in  their  respec- 
tive orbits,  have  a  common  authority  to  tax  many  and  di- 
verse objects,"  ^  and  although  this  form  of  double  taxation 
is  far  less  objectionable  in  practice  than  the  levying  of  both 
state  and  local  taxes  on  property  assessed  locally,  yet  it 
might  be  said  to  argue,  if  not  a  breach  of  federal  comity,  at 
least  a  certain  lack  of  system  in  the  Nation's  finances. 

The  case  against  a  National  inheritance  tax  is  forcibly 
stated  in  the  following  memorial  to  Congress  adopted  in 
1901  by  the  legislature  of  Wisconsin :  - 

The  memorial  of  the  legislature  of  Wisconsin  to  the  Con- 
gress of  the  United  States  respectfully  shows  that  in  the 
opinion  of  the  legislature  the  imposition  of  inheritance  or  suc- 

1  Knowlton  vs.  Moore,  178  U.  S.  41,  60. 

-Laws  of  1901,  p.  705.  The  National  Conference  on  State  and  Local 
Taxation,  meeting  in  November,  1907,  also  adopted  a  resolution  recom- 
mending that  inheritance  taxes  be  left  exclusively  to  the  states. 


234  'rHE  INHERITANCE  TAX  [404 

cession  taxes  belongs,  except  in  certain  exigencies,  to  the  do- 
main of  state  taxation ;  that  the  emergency  of  war  which  may 
have  justified  the  feature  of  the  national  war  revenue  act  of 
June  thirteenth,  1898,  levying  a  tax  on  legacies  and  distribu- 
tive shares  of  personal  property  has  now  passed  away;  that 
many  of  the  states  have  already  adopted,  and  many  more  will 
soon  adopt,  such  inheritance  tax  laws,  and  if  such  feature  of 
the  national  act  remains  in  force,  a  large  amount  of  property 
in  the  country  will  be  subjected  to  double  taxation,  once  by  the 
federal  government  and  again  by  the  state ;  and  that  it  is  ex- 
pedient, and  would  be  good  governmental  policy,  that  the  part 
of  such  national  revenue  act  imposing  a  tax  on  legacies  and 
distributive  shares  be  repealed  and  this  feature  of  taxation  be 
left  entirely  to  the  jurisdiction  and  control  of  the  states.  It  is 
the  purpose  of  this  memorial,  therefore,  to  respectfully  request 
of  Congress  the  repeal  of  said  feature  of  the  revenue  act  dur- 
ing the  present  session. 

But  while  the  states  need  the  inheritance  tax  to  replace 
the  tax  on  personal  property,  the  National  government  also 
shotild  have  a  direct  tax  among  its  sources  of  revenue,  in 
order  that  the  tariff  may  be  revised  Avithout  fear  of  a  deficit, 
and  with  more  regard  to  social  and  industrial  conditions 
than  to  the  needs  of  the  treasury.  Shall  this  be  an  inherit- 
ance tax,  or  some  kind  of  an  income  tax?  It  should  be  borne 
in  mind  that  the  income  tax  annulled  by  the  vSupreme  Court 
in,  1895  was  only  one  form  of  income  tax,  and  a  very  crude 
and  imperfect  form.  In  order  to  be  practically  enforceable, 
as  well  as  constitutional,  an  income  tax  should  be  mainly 
a  tax  on  business.  As  the  states  cannot  very  effectively 
reach  the  proceeds  of  interstate  commerce,  so  much  at  least 
may  well  be  taxed  by  the  National  government ;  and  in  order 
that  the  inheritance  tax  may  be  left  exclusively  to  the  states, 
it  may  be  necessary  for  Congress  to  tax  intra-state  business 
as  well. 


APPENDIX 
Proceeds  of  Inheritance  Taxes  in  the  United  States 

The  inheritance  taxes  paid  in  the  various  states  now 
amount  to  about  $10,000,000  a  year.  Below  are  shown  the 
receipts  from  this  source  for  four  years  past : 

PROCEEDS   OF  STATE   INHERITANCE  TAXES,  I902-I906,  IN  COMPARISON  WITH   THE 
ESTIMATED  TRUE  VALUE  OF  TAXABLE  WEALTH  IN  EACH  STATE,  I904. 

(In  most  cases  the  receipts  reported  are  net  receipts,  exclusive  of  commissions,  etc.) 


State. 


Arkansas 

California 

Colorado 

Connecticut  . . . 

Delaware 

Illinois 

Iowa 

Louisiana 

Maine 

Maryland 

Massachusetts  . 

Michigan 

Minnesota 

Missouri 

Montana'' 

Nebraska 

New  Hampshire 
New  Jersey .... 

New  York 

North  Carolina. 

Ohio^* 

Oregon  

Pennsylvania  . . 
South  Dakota.. 

Tennessee 

Utah 

Vermont 

Virginia , 

Washington 

West  Virginia  . 

Wisconsin 

Wyoming 


Taxable 
wealth, 

Inheritance-tax  receipts. 

1904 

(miUions  of 

dollars). 

1902-03. 

1903-04. 

1904-05. 

3755 

1905-06. 

781 

;$i,6o5 

J566 

$850 

3.881 

'285,868 

'286,561 

'532,713 

'292,705 

1,101 

"5,960 

'5.961 

'48,646 

'48,647 

I.317 

249,730 

265,781 

284,117 

274,259 

221 

1,618 

3,272 

3,102 

8,534 

'460,857 

'460,858 

'688,312 

'688,312 

3.943 

'"7,333 

^141,721 

'141,722 

190,748 

980 

10,694 

57,001 

86,655 

749 

31,227 

73,899 

69,076 

70,534 

1,417 

67,115 

91,559 

76,665 

107,820 

4,533 

506,147 

562,193 

694,181 

712,720 

3.149 
3,229 
3,598 

1x63,572 

3,422 

142,564 

'181,539 

187,036 

289,025 
159,455 
213,131 

122,030 

305,551 

636 

^8,506 

'8,506 

"6,038 

'6,038 

1,949 

493 

3,022 

"2,804 

'2,805 

'2,120 

'2,120 

3.277 
200,780 

138,932 

438,635 

202,668 

13,440 

4,665,736 

5,428,052 

4,627,051 

4.713.3" 

812 

5,324 
406,744 

4.673 
124,457 

5.693 

39,276 

78,209 

766 
10,814 

6,826 
1,080,578 

23,192 
1,677,185 

15,290 
1,507,962 

1,300,835 

629 
1,058 

1,450 
'34,310 

■■^56,007 

'56,007 

'34,310 

407 

44,144 

39,393 

9,971 

39,889 

342 

29,440 

37.227 

41,058 

40,581 

1,235 

19,612 

12,797 

20,215 

28,742 

986 

8,292 

25,774 

'33,267 

'33.268 

814 

1.367 

6,443 

10,495 

26,052 

2,734 
256 

4.320 

125,965 
'4,373 

103,917 
'4,373 

'Refunds  deducted.  ^  One-half  the  receipts  for  two  years. 

'The  figures  here  given  represent  the  state's  share  only;   that  is,  in  the  case  of  Montana 
three-fifths  of  the  total  receipts,  and  in  the  case  of  Ohio,  three-fourths  of  the  net  receipts. 


405] 


23s 


236 


THE  INHERITANCE  TAX 


[406 


The  following  table  shows  the  receipts  from  the  National 
tax  on  legacies  and  distributive  shares  of  personal  property 
during  the  two  fiscal  years  when  it  was  most  fully  in  oper- 
ation, in  comparison  with  the  estimated  value  of  all  personal 
property  in  each  state  or  collection  district: 


PROCEEDS    OF   THE    NATIONAL  TAX    ON    LEGACIES  AND   DISTRIBUTIVE    SHARES    OF 

PERSONAL  PROPERTY,  I9OO-I902,  IN  COMPARISON  WITH  THE   ESTIMATED 

TRUE  VALUE   OF  PERSONAL  PROPERTY,  I9OO. 


State. 


Alabama 

Arkansas  

California  and  Nevada 

Colorado  and  Wyoming 

Connecticut  and  Rhode  Island 

Florida 

Georgia 

Hawaii 

lUmois 

Indiana 

Iowa 

Kansas,  Oklahoma  and  Indian 
Territory 

Kentucky 

Louisiana  and  Mississippi. . . . 

Maryland,  Delaware,  and  Dis- 
trict of  Columbia 

Massachusetts 

Michigan 

Minnesota 

Missouri 

Montana,  Idaho,  and  Utah. . . 

Nebraska 

New  Hampshire,  Maine,  and 
Vermont 

New  Jersey 

New  Mexico  and  Arizona . . . . 

New  York 


Value  of  personal 

property,'  1900 
(millions  of  dollars) 


1900. 


401 
296 
1.235 
596 
704 
168 
453 

2,711 
1,106 
1,316 

1,278 
569 
703 

759 
1,442 

1.035 
1,056 

1.243 
665 

751 

652 
1,107 

254 
4.533 


Legacy-tax  receipts. 


1900-1901. 


;f5i,353-io 

88,518.41 
2,086.26 

358,95473 

282.27 

3,144.68 

5,303-76 

345,636.55 

9,355-47 

19.533-59 

6,964.17 
12,934.06 
20,186.62 

"217,581.10 

452,944  61 

66,498.47 

17,961.27 

78,078.32 

2,843.40 

1,732.90 

67,813.64 

295.935-17 

455-71 

2,314,425.51 


1901-1902. 


)?5.935-90 
2,062.21 

61,497-39 

7.748.33 

641,096.10 

24,812.96 

1,051.56 

325,964.84 

19,194,24 

44,274.50 

107.20 

13.350.17 
20,076.69 

'99,4J!7.05 
559,296.97 
67,780.66 
23,147.10 
91,011.72 
162,744.19 
10,547.10 

114,115.15 

79.861.37 

660.55 

1,608.843.83 


'  Including  stocks  and  bonds  of  railroads,  etc. 

*  Including  Accomac  and  Northampton  Counties,  Virginia. 


407]  APPENDIX  237 

PROCEEDS   OF  THE  NATIONAL  TAX   ON   LEGACIES,  ETC. —  Concluded. 


State. 


North  Carolina 

North  and  South  Dakota 

Ohio 

Oregon  and  Washington 

Pennsylvania 

South  Carolina 

Tennessee 

Texas  

Virginia 

West  Virginia 

Wisconsin 

Total 


Value  of  personal 

property,'  1900 

(millions  of  dollars). 


1900. 


343 

500 

2,100 

602 

3.917 
247 

445 
1.013 
508 
326 
943 


35»98o 


Legacy-tax  receipts. 


1900-1901. 


^2,577.13 

175,067.92 

^141.21 

571,019.10 

2,780.25 

6,395-58 

18,264.77 

8,373.08 

2,865.09 

33.890.78 


;?S,2II, 898.68 


I9OI-I902. 


$3,215.10 

83.93 

69,321.70 

'6,641.72 

660,753.94 

6,793.95 
7.383,18 
if<,643,32 
15,791.19 
10,564.64 
62,176.07 


$4,842,966.52 


*  Including  stocks  and  bonds  of  railroads,  etc. 

*  Included  with  Nebraska. 


'  Including  Alaska. 


TABLE  OF  CASES. 


PAGE 

Alvany  z'S.   Powell,  2  Jones  Eq.  51 183 

Attorney-General  vs.  Hope,  i  Cromp.,  Mees  &  Ros.  530 183 

Banks  vs.  State,  60  Md.  305 no 

Barringer  vs.  Cowan,  2  Jones  Eq.  436 in 

Bittinger's  Estate,  129  Pa.  338 98,  167,  181,  182 

Black  7's.  State,  1 13  Wis.  205 1 16,  178 

Blackstone  vs.  Miller,  188  U.  S.  189 187 

Bronson,  Matter  of,  158  N.  Y.  i 185 

Callahan  vs.  Woodbridge,  171  Mass.  595 185 

Campbell  vs.  California.  200  U.  S.  87 180 

Chambe  vs.  Judge  of  Probate,  100  Mich.  112 139 

Commonwealth  vs.  Coleman's  Administrator,  52  Pa.  468 181 

Commonwealth  vs.  Nancrede,  ^^  Pa.  389 100 

Commonwealth  vs.  Powell,  51  Pa.  438 100 

Commonwealth  vs.  Smith,  5  Pa.  142 183 

Connell  vs.  Crosby,  210  111.  380 184 

Cope's  Estate,  191  Pa.  i 100,  167,  177 

Curry  vs.  Spencer,  61  N.  H.  624 123.  157 

Dobermiller's  Appeal,  17  N.  J.  Law  Jour.  378 134 

Drayton's  Appeal,  61  Pa.  172 184 

Drew  vs.  Tifft,  79  Minn.  175 121,  177 

Dubois,  Appeal  of,  121  Pa.  368 100 

Dufour,  Succession  of,  10  La.  An.  391 103 

Eidman  vs.  Martinez,  184  U.  S.  578 186 

Enston,  Matter  of,  113  N.  Y.  174 184 

Eyre  vs.  Jacob,  14  Grat.  422 159.  161,  163 

Fox's  Administrators  v.^.  Commonwealth,  16  Grat.  i 106 

Frederickson  vs.  Louisiana,  23  How.  445 102 

Frothingham  vs.  Shaw,  175  Mass.  59 182 

409  [239 


240  THE  INHERITANCE  TAX  [410 

PAGE 

Gelsthorpe  vs.  Furnell,  20  Mont.  299 162,  169 

Greves  vs.  Shaw,  173  Mass.  205 185 

Hagerty  vs.  State,  55  O.  St.  613 136,  180 

Hartman's  Estate  (N.  J.),  62  Atl.  560 182 

Hayes  vs.  Missouri,  120  U.  S.  68 175 

Hewitt,  Matter  of.  181  N.  Y.  547 187 

Hickok's  Estate,  78  Vt.  259 162 

Hopkins'  Appeal,  77  Conn.  644 182 

Houdayer,  Matter  of,  150  N.  Y.  27 187 

House  Bill  No.  122,  In  re,  23  Colo.  492 144 

Income-Tax  Cases,  158  U.  S.  601 94 

James,  Matter  of,  144  N.  Y.  6 184 

Knoedler,  Matter  of,  140  N.  Y.  379 216 

Knowlton  vs.  Moore,  178  U.  S.  41 95,  166 

Kochersperger  vs.  Drake.  167  111.  122 173 

Kohn,  Succession  of,  1 15  La.  71 168 

Mager  vs.  Grima,  8  How.  490 102,  164 

Magnes,  Estate  of,  32  Colo.  527 162 

Magoun  vs.  Illinois  Trust  and  Savings  Bank,  170  U.  S.  283..  126,  173,  175 

Maine  vs.  Hamlin,  86  Me.  495 162 

Maryland  vs.  Dalrymple,  70  Md.  294 183 

McDowell  vs.  Adams,  45  Pa.  430 100 

McPherson,  Matter  of,  104  N.  Y.  306 161 

Merriam,  Matter  of,  141  N.  Y.  479 184 

Miller  vs.  Commonwealth,  in  Pa.  321 184 

Minnesota  ex  rel.  Foot  vs.  Bazille,  97  Minn.  11 122 

Minnesota  ex  rel.  Frye  vs.  Bazille,  87  Minn.  500 121,  177 

Minnesota  ex  rel.  Russell  vs.  Harvey,  90  Minn.  180 122 

Minnesota  vs.  Gorman,  40  Minn.  232 119 

Minot  vs.  Winthrop,  162  Mass.  113 163,  169,  179,  180 

Missouri  vs.  Henderson,  160  Mo.  190 180 

Missouri  vs.  Switzler,  143  Mo.  287 141 

Moody  vs.  Shaw,  173  Mass.  375 185 

Moore  vs.  Ruckgaber,  184  U.  S.  593 185 

Morgan,  Matter  of,  150  N.  Y.  35 187 

Morris'  Estate.  138  N.  C.  259 162 

Murdock  vs.  Ward,  178  U.  S.  139 168 


^ll]  TABLE  OF  CASES  241 

PAGE 

Nebraska  vs.  Vinsonhaler,  105  N.  W.  472 162 

Nunnemacher  vs.  State,  129  Wis.  190 16.3,  176 

Ohio  vs.  Ferris,  9  O.  Circ.  Ct.  R.  298 177 

Ohio  vs.  Ferris,  53  O.  St.  314 136,  169-172 

Orcutt's  Appeal,  97  Pa.  179 184 

Orr  vs.  Gihnan,  183  U.  S.  278 168 

Pennsylvania  zs.  Coleman's  Administrator,  52  Pa.  468 181 

Pennsylvania  vs.  Nancrede,  32  Pa.  389 100 

Pennsylvania  vs.  Powell,  51  Pa.  438 100 

Pennsylvania  vs.  Smith,  5  Pa.  142 183 

Plummer  vs.  Coler,  178  U.  S.  115 168 

Pollock  z'S.  Farmers'  Loan  and  Trust  Co.,  158  U.  S.  601 94 

Prime,  Matter  of,  136  N.  Y.  347 127 

Pullen  vs.  Commissioners,  66  N.  C.  361 160 

Romaine,  Matter  of,  127  N.  Y.  80 183 

Scholey  vs.  Rew,  23  Wall.  331 164 

Schoolfield  vs.  Lynchburg,  78  Va.  366 107 

Sherman,  Matter  of,  153  N.  Y.  i 

Short's  Estate,  16  Pa.  63 182 

Small's  Estate,  151  Pa.  i 183 

Snyder  vs.  Bettman,  190  U.  S.  249 169 

State  vs.  Alston,  94  Tenn.  674 162,  169,  177,  179 

State  vs.  Clark,  30  Wash.  439 162,  180 

State  vs.  Dalrymple,  70  Md.  294 183 

State  vs.  Ferris,  53  O.  St.  314 136,  169-172 

State  vs.  Ferris,  9  O.  Circ.  Ct.  R.  298 177 

State  ex  rcl.  Foot  vs.  Bazille,  97  Minn.  11 122 

State  ex  rel.  Frye  vs.  Bazille,  87  Minn.  500 121,  177 

State  ex  rel.  Russell  vs.  Harvey,  90  Minn.  180 122 

State  vs.  Gorman,  40  Minn.  232 119,  157 

State  vs.  Hamlin,  86  Me.  495 162 

State  vs.  Henderson,  160  Mo.  190 180 

State  vs.  Mann,  ^6  Wis.  469 116,  157 

State  vs.  Switzler,  143  Mo.  287 141 

State  vs.  Vinsonhaler   (Neb.),  105  N.  W.  472 162 

Strode  vs.  Commonwealth,  52  Pa.  181 168 

Swift,  Matter  of,  137  N.  Y.  77 181,  182,  184 


242  T^HE  INHERirANCE  TAX  [412 

PAGtt 

Tennessee  vs.  Alston,  94  Tenn.  674 162,  i6g,  177,  179 

Thomson  vs.  Advocate-General,  12  Clark  &  Finn  i 183 

Tritt  vs.  Crotzer,  13  Pa.  451 100 

Tyson  vs.  State,  28  Md.  577 160 

Union  Trust  Co.  z>s.  Probate  Judge,  125  Mich.  487 162 

United  States  vs.  Hunnewell,  13  Fed.  Rep.  617 185 

United  States  vs.  Perkins,  163  U.  S.  625 169,  174,  184 

Van  Riper  z's.  Heppenheimer,  17  N.  J.  Law  Jour.  49 134 

Vanuxem's  Estate,  212   Pa.   315 184 

Wallace  vs.  Myers,  38  Fed.  Rep.  184 168 

Washington  vs.  Clark,  30  Wash.  439 162,  180 

Weaver's  Estate,  no  la.  328 181 

Whiting,  Matter  of,  150  N.  Y.  27 187 

Williamson's  Estate,  153  Pa.  508 184 

Wilmerding,  In  re,  117  Cal.  281 162 

Wisconsin  vs.  Mann,  76  Wis.  469 116,  157 

Wright's  Appeal,  38  Pa.  507 100 

Zickler  vs.  Union  Bank  and  Trust  Co.,  104  Tenn.  277 134 


INDEX. 


Aargau,  40,  41 

Ability  to  pay  taxes,  206,  220 

Accidental-income  argument.  205 

Account  duty  in  Great  Britain,  61 

Administration,   154-155 

Administrators,  liability  of,  155 

Aerariutii  niilitare.  12 

Agriculture,  reduced  rates  in  Ger- 
many, :i7 

Akin,  Edward  C.  174 

Alabama,  113 

Aliens.     See  Foreign  heirs. 

Alms,  exemption  of,  27 

Alsace-Lorraine,  S3'  34 

Anhalt,  34,  35 

Antony,  11 

Appenzell,  41 

Appraisers'  fees  in  Illinois,  126;  in 
New  York,  154 

Appraisers,  salaried,  154 

Argentina,  58 

Aristocracies,  justification  of,  225 

Arkansas,  146,  153,  235 

Augustus,  12.  13 

Australasia.  66-76 

Austria,  49-50 

Back-taxes  argument,  204 

Back  taxes  collected.  204 

Baden,  34.  35 

Baden-Durlach,  32 

Basel-Land,  40,  41,  43 

Basel-Town,  41.  45 

Bastable,  196,  209 

Bates  (Governor  of  Massachusetts), 

132 
Batavian  Republic,  48 
Bavaria,  34,  35 
Belgium,  54 
Bellamy,  Edward,  201 
Benefit  theory  of  taxation,  201 
Bentham,  Jeremy,  193,  194,  207 
413] 


Bequest,  222;  abolition  of  proposed, 
207 ;  not  a  necessary  conse- 
quence of  private  property,  201 

Bequests  for  public  purposes,  ex- 
emption of,  221  ;  to  United 
States  taxable,  168,  174 

Bern,  41,  42 

Bcsold,  Christoph,  20  note. 

Black.  F.  S.  (Governor  of  New 
York),  128,  227 

Blackstone.  18 

Blodgett.  Justice,  157 

Bluntschli.  195,  207 

Bonds,  government,  167-168 

Boston  Executive  Business  Associa- 
tion, 131 

Brazil.  57 

Brandenburg.  32 

Bremen,  33-35 

Brewer,  Justice.  175 

British  Columbia.  84 

British  Empire.  60-86 

Brunswick-Liineberg,  32 

Brunswick,  34 

Bulgaria,  56 

Business,  disturbance  of  by  inheri- 
tance. 224 ;  tax  on  proposed.  234 

Caesar,  12 

California.  137-139.  150,  152,  I53, 
228,  235 

Canada,  77-86.  232 

Cape  of  Good  Hope.  76 

Capital,  diminution  of.  190-191.  209- 
210 

Caracalla,  14 

Carnegie,  Andrew,  196,  201,  202.  224 

Chamberlain  (Governor  of  Ore- 
gon), 146 

Chile,  57 

CciifieDic-denier,  22 

Co-heirship  of  the  State.  207 
243 


244 


THE  INHERITANCE  TAX 


[414 


Code  Justinian,  14 

Collateral-inheritance  tax  defined.  6 

CoUf;ction,  expense  of,  in  New  York, 
154 

Colorado.  143-144.  I49.  152,  I53,  235 

Commissions  for  collecting  tax,  99, 
114,  139,  140.  141.  142,  15s;  to 
executors  and  administrators, 
tax  on  in  Maryland,  108-110 

Concentration  of  wealth,  210 

Connecticut,  130-131,  137,  152,  153, 
188,  231,  235 

Conflicts  of  jurisdiction,  85-86,  180- 
188 

Constantine  the  Great,  14 

Constitutionality  of  inheritance 
taxes,  156-159 

Corporation  taxes,  232 

Corporations,  securities  of,  184-188 

Corporations,  tax  on  in  lieu  of  in- 
heritance tax,  217;  in  Austria, 
50 ;  in  Bavaria,  35 ;  in  France, 
27-30 ;  in  Great  Britain,  65 ;  in 
Italy,  51  ;  tax  on  organization 
of,  140,  217 

Corse-present,  18 

Cost-of-service  argument.  203 

Counties,  part  of  proceeds  assigned 
to   in    Montana,    143 ;   in    Ohio, 

135 
County  road  funds  in  Nebraska,  144 

Dallas,  Secretary,  88 

Dark  Ages,  19 

Death  duties  in   Great   Britain,  60- 

66;  origin  of  name,  62 
Debtor,  power  of  state  over,  187 
Debts,  23,  24,  35,  2,7,  42,  48,  49,  52, 

56,  64,  75,  148,  216 
De  Cerenville,  43 
De  Foville,  229 
Definitions,  6 

Delaware,  1 14- 1 15,  I53,  235. 
Demoralizing     effect     of     inherited 

wealth,  10,  224 
Democracy,  227,  231 
Denmark,  53 
Deposits,  186 
Diffusion  of  wealth,  222 
Diffusion-of-wealth   argument,   200- 

201 
Dilke,  Sir  Charles,  66 
Diocletian,  14 
Direct     heirs,    exemption    of,    219 ; 


proportion  of  properly  passing 
to,  230 

Direct-inheritance  tax  declared  un- 
constitutional in  Ohio,  169;  in 
Pennsylvania,  100 

Direct -inheritance  taxes,  in  what 
states  found,  152 

Discount  for  prompt  payment.  99. 
127,  135,  137,  147,  148,  149 

Distribution  of  wealth,  210,  213 

Disturbance  of  business  by  inheri- 
tance, 224 

Domicile,  180-188 

Double  taxation,  157,  158,  211;  by 
conflicting  jurisdictions,  85-86, 
187;  avoided  by  reciprocal  pro- 
visions, etc.,  38.  46,  130,  133,  187- 
188;  not  unconstitutional,  186 

Douglas  (Governor  of  Massachu- 
setts), 132 

Droit  de  controle,  22 

Dudley  Bill,  128  note. 

Due  process  of  law,  161 

Economic  theory,  189-234 

Egypt,  II 

Elasticity,  215 

Ely,  R.  T.,  207 

England,  16,  19,  60.     See  also  Great 

Britain. 
Enfantin,  195 
Equality   in   taxation,   157-160,    171 ; 

rule  violated  in  Minnesota,  119, 

Equality  of  opportunity,  223 

Erbkauf,  21 

Escheat,  24,  160,  163,  208;  extension 
of.  192-193.  199,  207 

Eschenbach,  201 

Estate  duty  in  Great  Britain,  61-65, 
85,  183,  205 

Estates,  life,  15,  S7,  148-  See  also 
Usufruct. 

Evasion  of  personal-property  taxes, 
204;  of  inheritance  tax  by  gifts 
inter  vivos,  212 

Excise,  164 

Executors,  liability  of,  155 

Exemption,  law  of,  176-180;  of  be- 
quests for  certain  purposes,  221  ; 
of  certain  relatives,  157.  179- 
180,  219;  of  small  amounts,  157, 
159,  170,  176-178,  220 

Exemptions,  effect  upon  revenue.  230 


415] 


INDEX 


-'45 


Expectation  of  life,  211 
Extension-of-escheal  argument,  199 

Family,  effect  of  size  of,  220 
Family  theory  of  property,  225 
Farlcu,  17 
Federal  inheritance  taxes,  87-96,  231- 

234 
Feudal  incidents,  15-20 
Finanz-Archiv,  5.     See  also  Schanz, 

Georg. 
Florence,  20 
Foreign    corporations,    stocks    and 

bonds  of.  184 
Foreign  decedents,  185 
Foreign  heirs,   rates   discriminating 

against,  z^,  47.  81,  82,   181  ;   in 

Iowa,  142 ;  in  Washington,  145 ; 

tax    on    in    Louisiana,    101-103, 

164 
Forestry,  reduced  rates  in  Germany, 

27 

Foros,  55 

Fourteenth  Amendment,  126,  171, 
173-176,  178,  186 

France,  16.  20,  22-31,  212;  treaty 
with,  102 

Fraud,  little  opportunity  for,  214; 
prevention  of,  215 

Frederick  William,  32 

Freiburg,  41,  44 

Funeral  expenses,  deducted  in  Ger- 
many, 2)7  \  in  the  Netherlands, 
48;  in  Russia,  52;  in  Great  Brit- 
ain, 64;  in  New  Zealand,  75;  in 
North  Dakota,  148 

Generation,  length  of,  228-229 

Geneva,  39,  40,  41,  45 

Genoa,  20 

Germany,  20,  188,  205,  219;  Imperial 
tax.  35-38;  state  taxes,  32-35 

Giffen,  Robert,  229 

Gifts  causa  mortis,  213,  217 

Gifts,  taxes  on,  27,  28,  35,  ^7,  42, 
52.  217 

Gladstone,  61,  62 

Glarus,  39,  41,  44 

Gordian,  14 

Gonzagas,  21 

Graduated  rates.  See  Progressive 
rates. 

Graduation  according  to  relation- 
ship, 203,  207,  217-219 


Gray,  Judge,  181 
Great  Britain,  60-66,  214 
Greece,  56 
I  Grisons,  45 
Guatemala,  58 
Guthrie,  Wm.  D.,  128,  174,  227 

Habitation  tax.  132 

Hadrian,  14,  15 

1  [all.  Bolton,  213 

Hallam,  15 

Hamburg,  t,2.  t,?,,  34,  35 

Harcourt,  Sir  Vernon.  62,  85-86 

Harrison.  Benjamin,  174 

Hawaii,  151 

Heard  (Governor  of  Louisiana),  103 

Helvetic  Republic.  39 

Henry  II   (of  France).  22 

Henry  VIII  (of  England),  18 

Heriot,  15,  17.  18,  19 

Herodotus,  229 

Hesse,  34 

Holland.  47.  60 

Hollander   Act  in   Porto   Rico.   151, 

213  note. 
Hungary.  49.  50 

Idaho.  150,  152.  153.  228 

Illinois,  124-126,  143.  144,  146,  149, 
152.  153.  172.  176.  23s 

Illinois  Bar  Association.  200 

Immortality  of  corporations,  217 

Incidence.  215 

Income  tax,  205,  206.  212,  234;  Na- 
tional,   applied   to    inheritances, 

.94 

India,  76 

Industry,  efifect  upon,  212 

Information  fee.  32.  134 

Inheritance  a  creature  of  law,  160, 
172,  202;  basis  of,  225;  collat- 
eral, abolition  of  proposed,  194, 
207;  expediency  of,  223;  limita- 
tion of,  199-201,  222-225;  not  a 
necessary  consequence  of  pri- 
vate property.  201  ;  power  to 
regulate.  163,  i6g 

Inheritance-purchase,  21 

Insinuation.  22 

Instalments,  payment  in.  64.  211,  214 

Interstate  agreements,  187 

Interstate  complications,  180-188 

Interstate  commerce,  234 

Inventory  duty  in  Scotland,  61 


246 


THE  INHERITANCE  TAX 


[416 


Iowa,  142,  153,  181,  235 
Ireland,  61 
Italy,  20,  50-53 

Japan,  59 

Johnson,  John  (Governor  of  Min- 
nesota), 122 

Justice  in  taxation,  210,  214;  of  the 
inheritance  tax,  189-208 

Justinian  Code,  14 

Kentucky,  149,  153 
Knights  of  Labor,  196 
Knut,  17 
Kriiger,  207 

Lane,  Jonathan  A.,  131 

Lecky,  W.  E.  H.,  ID,  227 

Lee,  Judge,  159 

Legacies   to   municipalities,    169;    to 

the  United  States,  168,  174 
Legacy  duty  in  Great  Britain,  19,  63, 

64,  183,  205 
Legacy  tax.  Federal,  U.  S.,  89-94,  231 
Legal  theories,  156-188 
Leisure  classes,  justification  of,  225 
Leroy-Beaulieu,  23,  202.  209,  211 
Library  of  Congress,  5,  6 
Lien,  155,  165,  167 
Life  estates,  15,  t,j,  148 
Life  insurance,  216 
Lippe,  34 

Lipsius,  Justus,  20  note. 
Local  self-government  in   taxation. 

232 
Lodge,  H.  C,  95 
Lods  et  vcntes,  17 
Louis  XIV,  22 

Louisiana.  101-104,  153.  164,  181.  235 
Liibeck,  32,  33,  35 
Lucerne,  41,  45 
Lump-sum  argument,  205 
Lynchburg,  Va.,  107 

Macrinus,  14 
Magna  Carta.  16 
Maine,  137,  153.  233,  235 
Maitland,  17 
Manitoba,  82 
Mantua,  21 
Marcus  Aurelius,  14 
Marriage  contract,  28 
Maryland,  108-110,  153,  154,  155,  158, 
160,  183,  235 


Massachusetts,  131-133,  152,  153,  162, 
178,  180,  184,  188,  230,  233,  235 

McCulloch,  191 

McKenna,  Justice,  175 

McLane  (Governor  of  New  Hamp- 
shire), 124 

Mecklenburg-Schwerin,  34 

Merriam.  Wm.  W.,  168 

Mexico,  58 

Michigan,  139-140,  I53.  I57,  235 

Mill,  J.  S.,  194,  200.  209;  on  pro- 
gressive taxation,  221-222 

Minneapolis  Board  of  Trade,  120 

Minnesota,  118-123,  152,  153,  156,  157, 
177,  235 

Minor  children,  discrimination  in 
favor  of,  33,  138,  150,  207,  218 

Missouri.  140-142,  153,  157,  235  ;  Uni- 
versity of,  141 

Mobilia  sequuntur  personam,  183, 
187 

Monaco,  56 

Montana.  143,  153,  231,  235 

Moran,  T.  A.,  174 

Mortality  table,  Roman.  15 

Mortmain  tax  in  Austria,  50;  in 
France,  27-29;  in  Italy,  51 

Mortuaries,  18 

National  government,  power  to  tax 

inheritances.  164-166 
Nationalists,  196,  201 
Nature  of  inheritance  taxes,  156-159 
Nebraska.  144,  153,  231,  235 
Nerva,  13 

Netherlands,  20,  47-49 
Neuchatel,  40,  41,  45 
New  Brunswick,  82 
New   Hampshire,    123-124,   153,    157, 

158,  235 
New  Jersey.  134-135.  I53,  235 
New  South  Wales,  70 
New   York,    120,    126-129,    131,    138, 

153-155,   161,   181,   183,   184,   186. 

187,  204,  230.  232,  235 
New  York  Tax  Reform  League,  213 
New  Zealand,  73-75 
Nidwald.  45 
Nobel,  Alfred,  10 

Non-resident  decedents,  183,  184,  188 
Non-residents.     See  Foreign  heirs. 
North    Carolina.    110-113,    152,    153,^ 

160.  161.  183.  235 
North  Dakota.  148,  153 


41/] 


INDEX 


H7 


North,  Lord,  60 
Norway,  53 
Nova  Scotia,  80 

Objections  considered,  209-213 
Obligation  of  contracts,  186 
Obrecht,  Georg,  20  note. 
Octavian,  11 
Ohio.  135-137,  153.  169-172,  176,  177, 

235 
Oklahoma  constitution,  152 
Oldenburg,  34 
Ontario,  77-86 

Opportunity,  equality  of,  223 
Oregon,  146-147,  152,  I53,  235 
Origin  of  the  inheritance  tax,  11-20 
Orphans,  127,  212 

Partnership,  183 

Partnership  argument,  201-202,  208 

Pardee  (Governor  of  California), 
138 

Pattison  (Governor  of  Ohio),  136 

Paxson,  Chief  Justice,  182 

Pensioning  of  veterans,  12 

Pennsylvania,  97-101,  153,  154,  167, 
177,  182,  183,  184.  235 

Personal  property,  situs  of,  182 

Personal-property  tax,  failure  of, 
204;  substitute  for,  232 

Pitt,  61 

Pliny,  189,  208 

Poincare,  30 

Pollock,  17  ' 

Porto  Rico,  151-152,  213  note. 

Portugal.  55 

Practical  advantages,  213-215 

Primer  seisin,  17 

Prince  .Edward  Island,  83 

Privileges  and  immunities  of  citi- 
zens, 186 

Probate  courts,  charges  to  defray 
expenses  of,  115,  118,  124.  156, 
203 

Probate  duty  in  Great  Britain,  19. 
61.  183;  in  Massachusetts.  131; 
in  Sweden,  54 

Probate  fees.  203 ;  in  Canada.  79. 
80.  82,  83.  84;  in  Vermont,  143; 
in  Virginia.  104 

Probate  tax.  Federal.  88-91  ;  in  Penn- 
sylvania. 100 ;  in  Virginia.  104. 
106.  107 

Proceeds,    application   of,    232 ;    as- 


signed to  counties,  135;, of  Na- 
tional legacy  and  siitfccssion 
taxes,  93,  96,  236;  of  State  in- 
heritance taxes,  235 

Progressive  rates,  221-227;  constitu- 
tionality of,  126,  169-176;  Fed- 
eral, 95 ;  high,  in  what  countries 
imposed,  5,  231  ;  in  Australasia, 
66-75;  •"  California.  138;  in 
Canada,  77-84;  in  Colorado,  144; 
in  Idaho,  150,  228;  in  France, 
24-26 ;  in  Germany,  35-36 ;  in 
Great  Britain,  61-63;  in  Illinois, 
125;  in  Italy,  50,  51;  in  Massa- 
chusetts, 132,  133;  in  Minnesota, 
120-122;  in  Missouri,  140,  141; 
in  Nebraska,  144;  in  North 
Carolina,  112;  in  Ohio,  135-136; 
in  Oregon,  146;  in  Porto  Rico, 
151-152;  in  South  Dakota,  149; 
in  Switzerland.  40-45 ;  in  Texas, 
150;  in  Washington,  145;  in 
Wisconsin.  117,  228;  limitation 
of  inheritance  by.  200;  list  of 
states  lev-ying.  152;  proposed  in 
New  York,  128,  129;  proposed 
in  Russia,  53 

Progressive  taxation,  general  theory 
of,  226;  legality  of,  176;  polit- 
ical argument  against,  226-227 

Prussia.  34,  204.  205 

Psametichus  I,  12 

Public-service  corporations,  133,  185 

Putnam,  Herbert.  6 

Quebec,  80-82 
Queensland,  70-72 

Rachat.  16 

Real  estate  directed  by  will  to  be 
sold.  184;  fictitious  calculation 
of  value  of  in  Great  Britain.  62. 
in  South  Australia.  62 ;  taxable 
only  where  situated.  181- 182. 
184.  187 

Receipts,  regularity  of.  215 

Reciprocal  agreements.  46,  187 ;  pro- 
visions to  avoid  double  taxation. 
85.  130.  133,  187-188 

Registration  duties  in  France,  22- 
28 ;  in  Freiburg.  45 ;  in  Sweden, 

54 
Relief.   15-16.  19 
Remainders,  99,  148 


THE  INHERITANCE  TAX 


248 

Retaliatory  provisions  in  Connecti- 
cut, 188 

Reuss,  34,  35 

Revenue,  calculation  of,  228-231 

Reversions,  23,  24,  26 

Ricarclo,  191,  193 

Road  improvement  funds  in  Ne- 
braska, 144 

Roberts      (Comptroller      of      New 

York),  128,  204 
.Rome,  ii-iS 

Roosevelt,  President,  10,  198 

Rostock,  32 

Roumania,  56 

Russia,  52-53 

Sacrifice,  minimum,  208 

Saint  Simonians,  195 

Saxe-Altenburg,  34 

Saxe-Coburg,  34 

Saxe-Gotha,  34 

Saxe-Meiningen,  34 

Saxe-Weimar,  34 

Saxony,  34 

Say.  J.  B.,  191 

Scandinavian  countries,  53-54 

Schaffhausen.  40-42 

Schaumburg-Lippe,  34,  35 

Schanz,  Georg,  5,  206 

School  funds,  137,  140.  143 

Schwartzburg-Sondershausen,  34 

Scotland.  61 

Self-government,  local,  in  taxation, 
232 

Seligman,  E.  R.  A..  226  note. 

Separation  of  state  and  local  reve- 
nues, 232,  233 

Servants,  discrimination  in  favor  of, 
33.  43,  49,  201 

Settlement  estate  duty  in  Great  Brit- 
ain, 64 

Settlements,  stamp  tax  on  in  Vic- 
toria, 69 

Situs,  180-188;  of  government  bonds, 
184 

Small,  Albion  W.,  224 

Smith,  Adam,  47,  60,  190,  206,  210 

Socialists,  195.  See  also  National- 
ists. 

Solothurn,  40,  41,  42 

South  Australia,  72-73 

South  Dakota,  149,  152,  153,  235 

Spahr,  C.  B.,  230 

Spain,  55 


[418 


Spanish  America,  57-58 

St.  Gall,  40.  41,  44 

Stamp  taxes  in   France,  23,  27;  in 

Sweden,     54;     in     the     United 

States,  88-91,  163 
Sturm,  Johann,  20  note. 
Stourm,  193 

Summary  of  state  laws,  152 
Subject,  156-159 
Succession  defined,  216 
Succession    duty    in    Great    Britain, 

19,  63-64,  205 
Succession  tax  defined,  6;  Federal, 

in  the  United  States,  90,  164 
Schwartzburg-Rudolstadt,  34 
Sweden.  54 
Switzerland,  39-46 

Taney,  Chief  Justice.  164 

Tangible  and  intangible  property  dis- 
tinguished as  to  situs,  184,  188 

Tariff  revision,  234 

Tasmania,  73 

Tax-inquisitor  principle  in  New  Jer- 
sey, 134 

Taxing  power,  164,  169 

Tax-paying  ability,  206,  220 

Tennessee,  133-134,  162,  235 

Texas,_  1 50-151.  I53 

Theories,  economic,  189-234;  legal, 
156.  188 

Tlirift,  efifect  upon,  212 

Thurgau,  40,  41,  42 

Thuringian  states,  ^s 

Ticino,  41 

Todesfallsteuer,  39 

Trajan,  13,  189 

Transfers  of  property,  regulation 
of,  163 

Treaties,  102 

Types  of  those  inheriting,  223-224 

Umpfenbach,  208 

Unearned  wealth,  206,  221 

Uniformity,  159,  160 

United  States  bonds,  situs  of,  184 

United  States,  bequests  to,  taxable, 

United    States,    Federal    inheritance 

taxes,  87-96,  231-234 
Uri,  40,  41,  43,  45 
Uruguay,  57 
Usufruct,   23,   24,   26,   52,    55.      See 

also  Life  estates. 


419] 


INDEX 


249 


Utah,  145,  152,  153,  235 
Utrecht,  47 

VaUie-of-service  argument,  202-203 

Vaud.  41 

Venice,  20 

Vermont,  142,  153,  188.  235 

Veterans,  pensioning  of,  12 

Vicesiina    heridiiatiam,    12-15,    189; 

relation  to  feudal  incidents,  19 ; 

to  modern  inheritance  taxes,  20 
Victoria,  67-69 
Vienna,  49 

Virginia,  104.  153.  158,  159,  l6l,  235 
Vital  statistics  of  France,  228 
Voconian  law,  11 

War,  effect  upon  inheritance-tax  re- 
ceipts, 215 
Washington,  146,  152,  153,  181,  235 


Wealth,  responsibilities  of,  225 ;  in- 
herited, demoralizing  effects  of, 
10,  224;  unearned,  206,  221 

Wells,  David  A.,  91,  92 

West  Virginia,  129-130,  153,  188,  235 

Western  Australia,  73 

Widows  and  orphans,  212 

Wills,  tax  on  in  France,  27 ;  in  the 
Netherlands,  47 

William  the  Conqueror,  16 

Wisconsin,  115-118,  138,  150,  152, 
153.  156,  161,  162,  176,  177,  228, 
235  ;  memorial  to  Congress,  233- 

234 
Wiirtemberg,  34 ;  treaty  with,  102 
Wyoming,  147-148,  153.  235 

Zealand,  47 
Zug,  41,  44 
Zurich,  40,  41,  42 


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